All attention is focused on the release of the expected U.S. monthly employment report, looking for clues as to when the Federal Reserve (Fed) will begin cutting interest rates. Apple (AAPL) has reported its first job cuts since pandemic times, while Treasury Secretary Janet Yellen is visiting China.
Here are the five most important things to watch for this Friday, April 5, in the financial markets.
Nonfarm Employment Report
All attention this Friday is focused on the monthly U.S. nonfarm employment report due later in the day, which could make or break expectations for the Fed’s first rate cut in June.
Some members, including Chairman Jerome Powell, have stressed the need for the central bank to continue to analyze the data ahead of the start of a rate-cutting cycle.
Stunning growth by the U.S. manufacturing sector earlier this week has caused investors to lower their bets on an imminent Fed easing cycle, only to take a step back following the release days later of a weak U.S. services sector survey.
Estimates indicated that the nonfarm employment report would show about 122,000 jobs created in March, down from 275,000 jobs in February, suggesting that labor market conditions in the world’s largest economy are easing.
Investors and the Federal Reserve will also keep an eye on wage growth data, as hourly compensation is expected to have increased by 0.3% in March, up from February’s 0.1%.
Futures rally in anticipation of key employment data
U.S. stock futures are higher Friday, recovering to some extent after Thursday’s sharp drop, with eyes focused on the release of important labor market data.
Wall Street indexes closed in the red on Thursday after Minneapolis Fed President Neel Kashkari cast doubt on the wisdom of lowering interest rates in 2024 as inflation has been above target.
The Dow Jones Industrials index fell more than 500 points, nearly 1.4%, marking its biggest drop in over a year, while the broader S&P 500 and the Nasdaq Composite fell 1.2% and 1.4%, respectively.
All three indices are on track to close their week in the red and the Dow Jones is close to posting its worst week in more than a year.
Once again, all eyes are on the monthly employment report due today, which could provide important informative context ahead of the Fed’s decision on cuts.
Apple announces layoffs in the state of California
Apple has reported that it is laying off nearly 600 workers in California, which would be its first major batch of layoffs since the time of the pandemic.
The news comes shortly after Apple canceled a project to create a self-driving electric car.
The tech company has had a difficult 2024, with its share price dropping nearly 12% since the start of the year.
Last month, the U.S. Department of Justice announced its intention to sue the iPhone maker for monopolizing the smartphone market, noting that a dissolution order could be a remedy for ensuring competition fairness.
Also, in China, Apple’s iPhone sales have fallen 24% year-on-year in the first six weeks of the year.
This sharp drop, occurring in the world’s largest cell phone producer, reflects not only lower demand for the bitten apple’s flagship device, but also improving local competition.
Yellen asks China to tackle overcapacity
Janet Yellen has begun a five-day visit to China, her second as U.S. Treasury Secretary, aimed at easing tensions between the world’s two largest economies.
Yellen said shortly before arriving that her visit would be a “continuation of the dialogue that we have undertaken and deepened” since U.S. President Joe Biden and Chinese President Xi Jinping met in Indonesia in 2022.
The leader on Friday advocated a level playing field for U.S. companies and workers, as she pointed to the problems that overcapacity in Chinese manufacturing and rising exports are causing overseas, stoking potential trade tensions.
“I think addressing overcapacity, and more generally considering market-based reforms, is in China’s interest,” she says.
Oil rises on Middle East tensions
After hitting five-month highs, oil prices are stabilizing, as worsening geopolitical tensions in the Middle East have helped worries about crude shortages.
Both benchmark oil prices have reached their highest levels not seen since October and are expected to generate gains of over 2% this week, marking their second consecutive week of gains.
Iran, OPEC’s third largest producer, has signaled retaliation against Israel for the attack on its embassy in Syria on Monday, and Israel has said it will defend itself.
An escalation of the war in the Middle East could lead to further supply disruptions and could further stress markets in the coming months.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies have this week maintained their pace of production cuts, while Ukrainian drone attacks on Russian refineries may have damaged more than 15% of Russia’s production capacity.
The prospect of tighter markets was offset somewhat by data showing that U.S. production remained at historic highs last week, though a larger-than-expected decline in U.S. gasoline stocks indicated that the demand from the world’s largest fuel consumer was also picking up.
The focus now turns to key non-farm employment data due out this Friday for more data on the U.S. economy.
