The closing bell on Friday painted a rosy hue on Wall Street as the S&P 500 Index ($SPX) (SPY) surged by +1.11%, the Dow Jones Industrials Index ($DOWI) (DIA) climbed by +0.80%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up by +1.28%. The marketplace churned with moderate gains, fueled by unwavering confidence in the enduring might of the US economy to sustain both consumer spending and corporate profitability. This optimism persisted, even in the face of a robust US payroll report that raised the specter of prolonged high-interest rates. The report also soothed stockholders with news of a gentle reprieve in wage growth, marking a diminished average hourly earnings increase of +4.1% y/y in March, the most subdued uptick in nearly 3 years.

The buoyant atmosphere was somewhat shadowed by a surge in T-note yields following the report, which revealed a remarkable +303,000 rise in March nonfarm payrolls, significantly overshooting expectations and marking the strongest upsurge in a decade. This robustness bolstered speculations that the Federal Reserve would exercise prudence in trimming interest rates. Hawkish tones reverberated from the Fed on Friday, further uplifting T-note yields, as Dallas Fed President Logan cautioned against premature rate cuts, underscoring concerns about potential stagnation in inflation progress. Echoing similar sentiments, Fed Governor Bowman underscored the persistent risk of inflation escalation, advocating for restraint in rate adjustments. She advocated for a contingency that envisions a higher federal funds rate to maintain inflation stability, potentially necessitating fewer rate slashes to recalibrate monetary policy.

Successfully dodging pessimistic predictions, the US nonfarm payrolls surged by +303,000 in March, surpassing the anticipated +214,000 figure and recording the most substantial leap in 10 months. Concurrently, the unemployment rate edged down by -0.1 to 3.8%, mirroring predictions. The gears of the economy seemed to grind a tad slower, with average hourly earnings witnessing a gentle descent to +4.1% y/y from the prior month’s +4.3% y/y, aligning with forecasts and marking the most gradual ascension in nearly 3 years.

The markets have seemingly dialed down their expectations for a -25 bp rate cut, assigning a 6% probability for the forthcoming FOMC meeting on April 30-May 1 and a 53% likelihood for the ensuing juncture on June 11-12.

Elsewhere, overseas stock markets reported a different tune on Friday, with the Euro Stoxx 50 spiraling to a 2-week low, closing down by -1.10%. In the same breath, China’s Shanghai Composite observed a holiday hiatus for the Tomb Sweeping Day, while Japan’s Nikkei Stock Index slumped to a 3-week nadir, recording a decline of -1.96%.

The Ever-watchful Eye on Interest Rates

June 10-year T-notes (ZNM24) saw a notable dip of -15 ticks on Friday, as the 10-year T-note yield ascended by +8.1 bp to 4.390%. The surge in yields was propelled by the staggering hike in US March nonfarm payrolls, fostering beliefs that the Fed would maintain a cautious stance on interest rate adjustments. Additionally, an uptick in inflationary expectations chipped away at T-note prices, with the 10-year breakeven inflation rate surging to a 4-3/4 month peak of 2.399%. The hawkish reverberations continued on Friday, emanating from Dallas Fed President Logan and Fed Governor Bowman, both of whom reiterated the unwieldiness of contemplating interest rate cuts.

T-notes found some solace in the subdued US wage pressures manifested by the revised March average hourly earnings, marking a paced growth of +4.1% y/y, the most sluggish rate in nearly 3 years.

European government bond yields trailed a similar trajectory on Friday, with the 10-year German bund yield surging by +3.8 bp to 2.399% and the 10-year UK gilt yield ascending by +4.8 bp to 4.069%.

The Eurozone grappled with a setback in February retail sales, witnessing a contraction of -0.5% m/m, undershooting expectations that anticipated a -0.4% m/m decline. Germany’s performance was not unscathed, with February factory orders clocking a modest +0.2% m/m growth, which settled below the forecasted +0.7% m/m rise. The German import price index added to the gloom, dipping by -0.2% m/m and -4.9% y/y, missing the mark against anticipations of an unchanged m/m reading and a -4.6% y/y decrease.

Stock Market Gainers

Newmont (NEM) outshone the competition, soaring by over +5% after gold prices scaled to unprecedented heights and silver prices touched a 2-year zenith.

Western Digital (WDC) wasn’t far behind, surging by more than +3% post Rosenblatt Securities’ upgrade to buy from neutral, fixing a price target of $115.

Arch Capital Group Ltd (ACGL) recorded an impressive +3% increase after its insurance arm announced the acquisition of Allianz Global’s US MidCorp and Entertainment Insurance businesses for a whopping $450 million.

Uber Technologies (UBER) followed suit, climbing by more than +3% subsequent to Jeffries upping the stock’s price target to $100 from $95.

Eaton Corp Plc (ETN) found itself in the limelight, closing up by over +3% as RBC Capital Markets shifted the stock from sector perform to outperform status, accompanied by a hefty price target of $371.

The technology sector reveled in a buoyant sentiment on Friday, riding on the coattails of a surge in chip stocks. The likes of Nvidia (NVDA), Advanced Micro Devices (AMD), ASML Holding NV (ASML), and Applied Materials (AMAT) soared by more than +2%, alongside Broadcom (AVGO), Marvell Technology (MRVL), KLA Corp (KLAC), Lam Research (LRCX), and Microchip Technology (MCHP) that posted gains exceeding +1%.

Krispy Kreme (DNUT) witnessed a sweet uplift of over +7% after Piper Sandler’s vote of confidence in the stock’s potential, upgrading it to overweight from neutral and affixing a $20 price target.

Vertiv Holdings (VRT) recorded substantial growth, closing up by over +5% as Oppenheimer kicked off coverage with an outperform recommendation and a price target of $96.

Shockwave Medical (SWAV) clinched a modest uptick of over +1% post-acceptance of Johnson & Johnson’s acquisition offer at a whopping $13.1 billion, hovering at $335 a share.

The somber tones echoed in Tesla (TSLA) as it nosedived by more than -3%, claiming the top spot in losses within the Nasdaq 100 following a Reuters exposé on the renouncement of plans for a budget-friendly Tesla vehicle. Paramount Global (PARA) found itself sinking by over -3% post revelations by CNBC on Skydance Media’s decision to retain ownership in the company post a potential merger, either securing a significant minority or majority stake.

Lamb Weston Holdings (LW) was not immune to the downward trend, sliding by over -2% subsequent to Citigroup’s downward revision of the stock’s price target from $132 to $106.

Intel (INTC) bore the brunt of the negative sentiment, closing down by more than -2% and leading the descent in both the Dow Jones Industrials and Nasdaq 100. The aftermath of a bleak outlook on its factory operations during the previous session cast a shadow over the stock.

Defensive packaged food producers marked a trail of decline amidst a broader market surge, resulting in Campbell Soup (CPB), Hormel Foods (HRL), J M Smucker (SJM), Hershey (HSY), and McCormick & Co (MKC) nosediving by over -1%.

CCC Intelligent Solutions (CCCS) bowed to market pressures, closing down by over -1% following the revelation of a proposed secondary offering of 20 million shares of its common stock.

Earnings Reports to Watch (4/8/2024)

Eagle Pharmaceuticals Inc/DE (EGRX) and Waldencast plc (WALD).

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The author, Rich Asplund, maintains no financial positions in the securities mentioned in this article, directly or indirectly, as of the publication date. The contents herein are purely for informational purposes. For additional details, refer to the Barchart Disclosure Policy.

The opinions and perspectives articulated in this piece solely represent the author’s views and do not necessarily mirror those of Nasdaq, Inc.