By Daniel Shvartsman
Investing.com -- All market eyes are on the May U.S. nonfarm payrolls report, which is expected to show continued strong hiring but comes after a week of company or executive warnings. Elon Musk and Tesla are the latest big names to join that latter category with a leaked email suggesting a major job cut coming. OPEC+ finally responded to the big rise in oil prices with increased production plans. And on all of these fronts, the question to be answered is what's already priced into the market after a volatile year to date, with yesterday's major U.S. earnings reports offering a number of mixed data points.
Here's what you need to know for financial markets on Friday, June 3.
1. U.S. Jobs Report
Every jobs report is a big one, and even more so in the 2020s to date. The May nonfarm payrolls report comes at a key juncture, as the Federal Reserve has both raised rates and, as of this week, begun quantitative tightening. Expectations are that the U.S. economy will have added 325K jobs in May, a drop from last month's 428K and the 6-month average of 402K but a still considerable number. Meanwhile, the unemployment rate is expected to drop to 3.5%, its lowest pre-pandemic level.
With the Fed still locked on a plan for continued 50 basis points hikes, it's hard to imagine what in the jobs report might change that trajectory. At the same time, the ADP nonfarm number missed expectations at only 128K jobs added, and the drumbeat of private sector warnings continues apace, leaving investors bracing for a turn in the economy. Speaking of that drumbeat...
2. Elon Musk And Tesla The Latest To Consider Layoffs
Reuters reported that in an internal email, CEO Elon Musk called for a cut of about 10% of the Tesla (NASDAQ:TSLA) workforce. Musk cited a 'super bad feeling' about the economy, and has been vocal about concerns that a recession might be coming. This came after Musk called for all Tesla employees to work from relevant company offices at least 40 hours a week, and implies slower growth at the least at the electric vehicle maker.
This warning comes after a week in which JP Morgan CEO Jamie Dimon spoke of a coming hurricane, crypto firms Coinbase Global Inc (NASDAQ:COIN) and Gemini imposed hiring freezes or rescinded offers or layoffs, and Microsoft (NASDAQ:MSFT) lowered guidance for their current quarter. It serves as a reminder that despite the recent stock market rally and whatever the jobs number is this morning, there is at least doubt in the market.
3. PMIs Add Another Economic Data Point
At 10:00 am ET (1400 GMT), US purchasing manager index (PMI) readings come out. They are expected to show continued economic expansion with readings above 50, but slower expansion than in April. Amidst reports like that of Dimon's comments contrasting with those of Bank of America (NYSE:BAC) CEO Brian Moynihan, who is more optimistic about the consumer and thus the economy, the additional data on where U.S. economic activity actually is will be closely watched.
In the European session, Eurozone PMIs mostly followed the pattern expected of the US readings: continued growth, but slower than the prior month or expectations, with services as the stand-out as consumer spending rebalances.
4. Oil Drops As OPEC+ Plans An Increase
OPEC+ delivered on expectations of a production increase at their meeting yesterday, planning to raise production by 50% in July and August. The price of West Texas and Brent Crude oil dropped in early trading, down 0.6% and 0.5% respectively at 06:00 am ET (1000 GMT). That oil only dropped that much suggests either this was indeed already expected, or that a number of other factors - Shanghai's lockdown ending, a U.S. inventories draw, and the European embargo on Russian oil - could continue to support oil prices in the months ahead.
At 01:00 pm ET (1700 GMT), the Baker Hughes oil rig and total rig reports come out, giving a weekly indicator on U.S. shale drilling and its rise amidst the sustained higher energy prices.
5. Earnings Reactions Raise Pricing Questions
A slew of major U.S.-based companies reported earnings yesterday, and the responses raised questions about what is already priced into market prices after a turbulent start to the year. Among the reports:
- RH (NYSE:RH), the designer furniture retailer that was one of the first to warn of slowing consumer spending, beat estimates but lowered guidance. Its shares are trading flat pre-market.
- Okta (NASDAQ:OKTA), a security software company, popped nearly 17% in pre-market trade after beating expectations for both this quarter and guidance.
- Crowdstrike Holdings Inc (NASDAQ:CRWD) traded off 4.5% in the pre-market despite beating on all metrics.
- Lululemon Athletica Inc (NASDAQ:LULU) was up nearly 2% in early-hours trading on their strong report, even amidst doubts about their chance to outperform.
The recent rally from a mid-May bottom has led to questions about whether we are in a bear market rally or the market has indeed found a bottom. The mixed results and reactions, especially in hotter sectors like tech and retail, suggest that there's still a lot to figure out on an individual company basis, and that the proverbial 'stock-pickers' market might be upon us.
As of 06:15 am ET (10:15 GMT), S&P 500 Futures are trading down 0.4%, while Dow futures are 0.3% lower.