Friday May 8th

8-05-2020

Dow futures up 200 points even after record job losses as investors bet the worst has passed

U.S. stock index futures rose Friday even after the ugliest monthly jobs report ever as investors bet the worst of the coronavirus and its impact on the economy has passed. Dow Jones Industrial Average futures were up by more than 200 points, or 1%. S&P 500 futures were up 0.9%. Nasdaq-100 futures were 0.8% higher as tech stocks looked to add to their gains after pushing the Nasdaq Composite into positive territory for the year on Thursday. The Labor Department said a record 20.5 million jobs were lost last month, adding the unemployment rate jumped to 14.7% from just 4.4%. Both the spike in job losses and the unemployment-rate surge are post-World War II records. To be sure, neither print was as bad as feared. Economists polled by Dow Jones expected a loss of 21.5 million jobs and an unemployment rate of 16%. Stocks have rallied aggressively off their March lows as investors bet on an eventual reopening of the economy and that many tech companies would see solid revenue even through the shutdowns. The S&P 500 has bounced more 30% from its virus low and is just 15% from a record. The Nasdaq Composite is more than 35% off its lows and is now up 0.1% for 2020. Gains from Facebook, Amazon Alphabet and Apple helped lift the index back into positive territory for 2020. At one point, the Nasdaq was down more than 25% year to date. Most of those tech stocks were higher again in Friday’s premarket trading. “It’s amazing really given we’re still working from home,” said JJ Kinahan, chief market strategist at TD Ameritrade, about the average clawing back its 2020 losses. “Our reality is we’re working from home and some of the economic demand would seem to be less, yet these stocks continue to fight through.” Kinahan also noted the market continues to price in a swift reopening of the U.S. economy after the coronavirus forced economic activity to a near screeching halt. “There’s this sense of, ‘OK, we’re going to get back to work and things are going to be better.’ But at what pace are they going to get better, and will that be sustainable?” It’s helped that oil has rebounded off its lows. Crude is up more than 20% this week. Stocks that would benefit from reopening the economy rose again Friday morning. Airlines, Disney, MGM Resorts and Hilton Worldwide were all higher in premarket trading Friday. But Michael Shaoul, chairman and CEO of Marketfield Asset Management, said the market’s recent moves — which have been tame compared to others seen this year — suggest “an understandable fatigue with the constant stream of conflicting information about the progress of the virus and potential for happier and more drastic outcomes in the months ahead.” “It also suggests that the relief that the worst case medical scenarios are likely to take place is being replaced by an understanding of just how daunting the task of reopening and rebuilding economies will be in the coming months, leaving the SPX unable to move up and challenge key resistance at 3,000,” he said in a note. Stocks in Asia rose on Friday ahead of the release of the U.S. jobs report for April, expected later in the day stateside. Japanese stocks led gains among the region’s major markets, with the Nikkei 225 jumping 2.56% to close at 20,179.09. The Topix index also surged 2.21% to end its trading day at 1,458.28. Mainland Chinese stocks rose on the day with the Shanghai composite up 0.83% to about 2,895.34 while the Shenzhen composite gained 1.172% to around 1,809.17. Hong Kong’s Hang Seng index also added 0.89%, as of its final hour of trading. South Korea’s Kospi advanced 0.89% to close at 1,945.82 while the Kosdaq index soared 2.11% to finish its trading day at 682.30. Oil prices gained on Friday as more countries began relaxing restrictions put in place to halt the coronavirus pandemic, raising hopes that demand for crude and its products will start to pick up. Brent crude was up 23 cents, or 0.8%, to trade at $29.70 per barrel, having fallen nearly 1% on Thursday. U.S. oil gained 25 cents, or 0.85%, to trade at $29.70 per barrel, after a decline of nearly 2% in the previous session. Both contracts are heading for a second week of gains after the lows of April, when U.S. oil crashed below zero, with Brent up around 13% and WTI about 21% higher. Gold hit a near two-week high on Friday as investors awaited U.S. nonfarm payrolls data for pointers on the U.S. economy after a batch of weak economic indicators boosted hopes of more stimulus from the Federal Reserve. Spot gold was up 0.2% at $1,720.20 per ounce. Bullion has risen more than 1% so far this week. U.S. gold futures rose 0.3% to $1,731.10.