Market Trends Ahead of US Jobs Report: Stocks and Bonds Decline

As the market anticipates the upcoming US jobs report, stocks and bonds have seen a downturn. This report is crucial as it will influence the Federal Reserve’s future decisions. On the brink of this significant economic indicator, equity markets have pulled back from their peaks, with traders hesitant to place substantial bets prior to the release of the data. Similarly, Treasury bonds have declined alongside a global drop in bonds, triggered by the European Central Bank’s unexpected rate cut and revised inflation projections.

The current market environment is fraught with anticipation; jobless claims have exceeded expectations, U.S. labor costs have risen less than initially thought, and the trade deficit has expanded. The forthcoming jobs data is projected to reveal an addition of 185,000 jobs in May, with the unemployment rate remaining stable. Despite reaching its 25th record in 2024, the S&P 500 saw a slight decrease. Meanwhile, U.S. 10-year yields have increased slightly to 4.29%, and swap markets are betting on Federal Reserve rate cuts starting in November, with another likely in December.

In Europe, stock markets are close to reaching record highs, the euro has strengthened, and the yield on 10-year German bonds has increased to 2.55%. Corporate highlights include:

• The U.S. antitrust agencies have decided on their roles concerning the artificial intelligence sector, with the Federal Trade Commission poised to investigate Microsoft Corp.’s (MSFT) ties with OpenAI.
• Lyft Inc. (LYFT) forecasts a 15% compound annual growth rate in gross bookings over the next three years, shared during its first investor day.
• Instacart has launched a new $500 million share repurchase program, marking its third buyback initiative since September to bolster confidence in its growth trajectory.
• Newmont Corp., (NEM) the largest gold mining company globally, is on track with its plan to raise $2 billion as its asset sales draw interest.
• Lululemon Athletica Inc. (LULU) is experiencing strong international sales growth and new women’s merchandise, prompting an improved full-year profit forecast.
• Trafigura Group reports a significant drop in its first-half profit, the lowest since 2020, as the commodity trading firm adjusts to more stable conditions in its primary markets of energy and metals.
• SpaceX’s (private) Starship has successfully completed a critical test flight, launching into space and returning via an ocean landing, marking a significant milestone in its development.