U.S. Stocks Under Pressure after Release of Weak Employment Data

U.S. stock indices were lower Friday, following the release of a weaker-than-expected U.S. Non-Farm Payrolls report. June E-mini Dow Jones Industrial Average futures dropped to 17475 before rebounding to 17524, down 50 or -0.28%. June E-mini S&P 500 Index futures were trading 2035.00, down 9.00 or 0.44% and June E-mini NASDAQ-100 Index futures were on their low at 4271.00, down -29.25.

The April employment report showed creation of 160,000 jobs, with the unemployment rate at 5 percent and average hourly earnings rising 0.3 percent. The labor force participation rate fell to 62.8 percent.

According to Reuters, economists forecast 202,000 jobs were added in April. The unemployment rate was expected to be unchanged at 5 percent, while average hourly wages were expected to have grown by 0.3 percent.

Treasury yields fell, driving June 30-Year Treasury Bonds to 166’16 before breaking back to 165’13. June 10-Year Treasury Notes were trading 130’27, up 0.08%. The drop in yields suggests that investors have taken the possibility of a June interest rate hike off the table.

The fall in the Treasury yields made the U.S. Dollar a less desirable asset, helping to drive the US Dollar Index lower. The index initially fell to 93.085 before bouncing back to 93.685, down 0.095 or -0.10%.

The EUR/USD and GBP/USD were trading higher after the release of the jobs data. However, the AUD/USD continued to weaken, dropping 1.52% to 0.7737 in reaction to the news that the Reserve Bank of Australia slashed its inflation forecasts, suggesting they may implement as many as two more interest rate cuts by the end of the year.

The USD/CAD also bucked the trend, rallying to 1.2923, up 0.0070 or +0.55%. The catalyst behind the rally was a report showing employment in Canada unexpectedly decline in April amid cutbacks linked to the struggling energy industry and manufacturing. The Canadian Dollar dropped against the U.S. Dollar as Statistics Canada said employment fell by 2,100 positions in April, compared with the median forecast of a 1,000 job increase.

The weaker dollar helped June Comex Gold snap four days of losses. Gold advanced towards the psychological $1300.00 level and Monday’s high at $1306.00, reaching $1297.00, before falling back to $1293.20, up $20.90 or +1.64%. Gold is a dollar-denominated commodity that tends to rally because of increased foreign demand when the dollar weakens.

June Crude Oil turned higher after early session weakness, finishing at $44.44, up $0.12 or +0.27%.  Crude benefited from the weaker dollar and crude production cuts in Canada where a huge wildfire has disrupted oil sands operations.