Stock Market Today: Stocks tumble on hot jobs report; GameStop roars

Markets are focused on a key May jobs report that could cement the market's recent betting on a September Federal Reserve interest-rate cut.

Jun 7, 2024 - 18:30

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Stock Market Today: Stocks tumble on hot jobs report; GameStop roars

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U.S. equity futures slumped lower Friday, while Treasury yields and the dollar jumped higher, as investors picked through a key May employment report that will test the market's bets on a September Federal Reserve interest rate cut.

Updated at 8:46 AM EDT

A hotter-than-expected May jobs report is pounding Fed rate cut bets and sending stocks firmly lower in premarket trading.

The Labor Department said 272 new jobs were created last month, up from a revised April total of 165,000 and well ahead of the Street's 185,000 forecast.

Wages were hotter, too, with average hourly earnings rising 0.4% on the month and 4.1% on the year, adding to concerns that a healthy economy continues to stoke inflation pressures.

Stocks moved lower in the wake of the release, with the S&P 500 called 29 points in the red and the Dow looking at a 170 point slump.

Benchmark 10-year note yields added 10 basis points to trade at 4.404% while 2-year notes jumped 11 basis points to 4.855%.

The US Unemployment Rate moved up to 4.0% in May, the highest level since January 2022. In April 2023 it hit a 53-year low of 3.4%. Remains well below the historical average of 5.7% since 1948.https://t.co/mpJBYGzNyy pic.twitter.com/JnT5mcEl23— Charlie Bilello (@charliebilello) June 7, 2024

Stock Market Today

Stocks finished modestly lower Thursday, after touching intraday highs earlier in the session, as a pullback in some megacap tech names such as Nvidia (NVDA) and Apple (AAPL) offset the ongoing rally in Treasury bonds.

Friday's session, however, will be dominated by reaction to the Labor Department's May employment report, which is expected to show the economy added 185,000 new jobs last month while the headline unemployment rate held steady at 3.9%.

With a slew of job-market data this week signaling weak momentum heading into the summer months, a softer-than-expected reading could add to bets that the Fed will make the first of two rate cuts in September.

An upside surprise, meanwhile, could add to concerns that inflation pressures are likely to remain elevated, and that the economy is resilient enough to withstand the Fed's "higher for longer" rate messaging.

The Labor Department is expected to report that 185,000 new jobs were created last month, while the headline unemployment rate held at 3.9%
Shutterstock-fizkes

"It’s important to note that while we might observe a higher number this month, the broader trend shows a stabilization, if not a slight decline, in the growth rate of new hires," said Ken Tjonasam, portfolio strategist at Global X.

"The recent Jolts and ADP reports have been encouraging, pointing towards a normalization in the labor market, which will certainly catch the Fed’s attention, and the market may continue to reprice for a ‘1 or none’ Fed-cut scenario," he added.

Benchmark 2-year note yields were marked at 4.738% in early New York trading, while 10-year notes held below the 4.3% mark at 4.297%.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, slipped 0.01% to 104.089.

The CME Group's FedWatch, meanwhile, pegs the odds of a September rate cut at around 68%, while pricing in little chance of a move at either next week's policy meeting or the July gathering in Washington.

On Wall Street, equity futures suggest a muted open ahead of the jobs data at 8:30 am Eastern Time, with futures tied to the S&P 500 indicating a 3 point bump and the Dow Jones Industrial Average called 5 points higher.

The Nasdaq, meanwhile, is priced for a 31 point opening bell gain.

GameStop (GME) shares were back on the move in premarket trading, following on from yesterday's 47.5% surge. The market's leading meme stock added another 22.2% even as the retailer posted a first-quarter report showing a $32 million loss and a year-on-year sales decline of 29%.

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In overseas markets, Europe's Stoxx 600 slipped 0.33% in Frankfurt following yesterday's 0.25-percentage-point rate cut from the European Central Bank, the first since 2019, while Britain's FTSE 100 fell 0.52% lower in London.

Overnight in Asia, the Nikkei 225 ended the week 0.05% lower amid tepid trading ahead of today's May jobs report, while the regionwide MSCI ex-Japan index rose 0.39% into the close of trading.