New York Morning: April Labor Department report in focus

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Capital Markets Research, Freedom Broker.

The key macroeconomic event of the upcoming session will be the publication of the Ministry of Labor's data on the employment market for April. The consensus for the number of new jobs outside agriculture assumes a result of 65 thousand after an impressive 178 thousand in March, the number of new vacancies in the private sector is projected at 75 thousand (previous value: 186 thousand). Unemployment is expected to remain at 4.3%. Labor market statistics from January to March were highly volatile, creating uncertainty in assessing its prospects. If the unemployment rate remains at 4.3%, it will signal that the employment sector remains balanced. At the same time, the trend of slowing net hiring will be confirmed. In such a case, a Fed rate cut with the resumption of supply through the Strait of Hormuz remains the most likely next move by the regulator. Freedom Broker's benchmark for new jobs is more conservative: we expect a figure in the 40k range given the volatile January-March data. Average hourly earnings are expected to rise 0.3% mom after 0.2% in Ma. Significant above consensus employment or wage growth, especially when combined with a decline in unemployment to 4.2%, could be taken negatively by the market as it would reinforce expectations of a prolonged continuation of the Fed Funds rate at current levels.

The University of Michigan will today release its preliminary consumer sentiment index for Ma (consensus: 49.5 points, April: 49.8), which includes data on inflation expectations that are rising on the back of higher energy prices. There will be speeches by Fed Board of Governors member Lisa Cook and Vice Chair Michelle Bowman, which will be important for understanding the mood of the regulator's leadership after its April meeting.

The geopolitical backdrop remains highly volatile. Iran continues to consider the American proposal for a 14-point framework memorandum. The situation in the Strait of Hormuz has sharply escalated. This Wednesday, Ma. 6, CENTCOM forces disabled the Iranian tanker M/T Hasna for violating the terms of the blockade, and the next day three U.S. destroyers were subjected to a missile and drone attack by the Iranian Navy while passing through the strait, after which the U.S. retaliated with strikes against military installations on Qeshm Island and in Iran's coastal areas. The UAE issued a warning to the public urging them to stay in safe places. The White House, meanwhile, maintains that the ceasefire is not formally broken and negotiations are ongoing, but acknowledges uncertainty about the timing of a final agreement.

Fluor (FLR) released its quarterly results. Fidelity National Information Services (FIS), PPL Corporation (PPL), Enbridge (ENB), Brookfield Asset Management (BAM), Oshkosh Corp (OSK), and Orla Mining (ORLA) will also report before the main session opens.

Futures on US stock indices demonstrate moderately positive dynamics. We assess the balance of risks for the upcoming session as neutral with increased volatility. Successful reporting season and continued interest in AI-infrastructure form the basis for market growth. The positive potential is limited by profit taking in shares of chipmakers, ambiguous signals from the consumption segment and uncertainty around the Iranian settlement. The report of the Ministry of Labor is able to set the direction of quotations movement for the next few trading sessions.

- Akamai Technologies (AKAM) stock soared 28% after posting quarterly results and announcing a seven-year, $1.8 billion contract with a major AI model provider for cloud infrastructure. Cloud Infrastructure Services segment revenues grew 40% YoY. Management raised guidance for this area, reinforcing the perception that Akamai is a beneficiary of AI infrastructure demand.

- Shares of Cloudflare (NET) are losing more than 17%, although its quarterly report was better than average expectations. The pressure is due to the announcement that it will cut about 20% of its workforce (about 1,100 employees) as part of its transition to an operating model that prioritizes agent-based AI. The company estimated restructuring costs at $140-150 million.

- Despite the fact that Expedia Group's (EXPE) revenue, profit and profitability beat consensus, and EBITDA margin was a record high for the first quarter, the company's quotes are down about 7%. The market perceived the management's decision to maintain the annual forecast as a signal of possible cooling of demand in the second half of the year.

- Shares of Block (XYZ) are adding about 7% after reporting adjusted earnings per share above average market guidance while accelerating gross profit growth in its Cash App and Square segments. Management raised full-year guidance. Increased consumer lending and the use of AI in the operating model were important elements of the investment narrative.

- MercadoLibre (MELI) is down 4%, although its revenue showed the highest growth in almost four years and significantly exceeded forecasts. The negative reaction is due to lagging earnings behind expectations and shrinking operating margins amid investments in logistics, free shipping and expansion of its credit portfolio, primarily in key markets in Latin America.

- HubSpot (HUBS) shares collapsed by 25% despite quarterly results above expectations on revenue and earnings, as well as expansion of its customer base to nearly 300,000. The sell-off was triggered by the fact that the company's full-year revenue guidance was close to consensus, failing to meet higher expectations after the paper's strong performance.

- The securities of The Trade Desk (TTD) are down 12%. The cloud platform's revenue for the most recent quarter slightly beat expectations, but adjusted EPS fell short of consensus, and its second-quarter revenue guidance was below analysts' average guidance. This adds to concerns about slowing growth in the advertising business.

Ma 7 trading on the U.S. stock exchanges ended on the negative territory. S&P 500 decreased by 0.38%, Nasdaq 100 lost 0.12%, Dow Jones fell by 0.63%, Russell 2000 fell by 1.63%.

The main pressure factor was profit taking in overheated semiconductor stocks, which was accompanied by capital flows into the software sector. In the "Magnificent Seven" the dynamics was multidirectional: Tesla (TSLA: +3.3% at the close on May 7), Nvidia (NVDA: +1.8%) and Microsoft (MSFT: +1.7%) closed in the plus, Amazon (AMZN: -1.4%) was among the laggards, Apple and Alphabet showed about zero dynamics.

Only the communications sector (XLC: +0.03%) remained in a symbolic plus, supported by the flow of funds into the securities of software developers and the service segment. Raw materials producers (XLB: -1.93%) and energy (XLE: -1.84%) were the outsiders amid the decline in oil prices and sell-offs in cyclical assets.

Macroeconomic statistics was mixed, but in general confirmed the stability of the labor market. The number of initial claims for unemployment benefits amounted to 200 thousand with a consensus of 205 thousand, and the number of repeated applications updated the minimum since January 2024. Preliminary data on labor productivity for the first quarter (0.8%) fell short of market expectations, but unit labor costs grew weaker than forecast (2.3% vs. 2.6%). At the corporate level, concerns about the state of consumer demand intensified. The management of McDonald's and Papa John's warned of shoppers switching to savings due to high prices. Against this background, many traders preferred to take a wait-and-see attitude before today's publication of April statistics of the Ministry of Labor on employment outside agriculture (non-farm payrolls).

Fed officials emphasized the need to keep rates at current levels for an extended period of time. Head of FRB New York John Williams pointed to signs of a K-shaped economic recovery putting strong pressure on low-income households. This rhetoric contributed to the growth of Treasury bond yields by 2-3 bp.

- Datadog (DDOG: +31.3% at the close of trading on May 7) delivered its strongest quarterly report since the post-Q3 era and raised its outlook for the year. An increase in the number of large corporate clients and significant outperformance of consensus on all key metrics returned investors' optimism about the company's business prospects.

- Planet Fitness (PLNT: -31.2%) worsened its guideline for the current year and scrapped a planned price increase for premium subscriptions. Investors pointed out that the growth in comparable sales was driven solely by pricing and not by an influx of new visitors, which triggered a collapse in the company's shares.

- Whirlpool (WHR: -11.9%) recorded a sharp weakening in demand for home appliances, forcing it to severely cut its full-year forecasts amid macroeconomic challenges and pressure on profitability, and to announce a suspension of dividend payments. At the same time, the company announced double-digit price increases for its products.

- Broadcom (AVGO: -3%) and OpenAI failed to agree on financing terms for the first phase of an $18 billion production run of AI chips for data centers.

- Shake Shack (SHAK: -28.3%) reported quarterly revenue and earnings below forecasts due to weak traffic and unfavorable weather conditions. The company's management lowered its full-year EBITDA guidance, adding to concerns about a sharp decline in the diner chain's operating cash flow.

- AAON (AAON: +31.5%) significantly exceeded revenue and profit expectations. Its order book grew 107.4% YoY to a record $2.13 billion, driven by strong demand for data center solutions. This was the basis for raising its revenue growth forecast for 2026 from 18-20% to 40-45%, which more than offset the localized decline in gross margin.

This article was AI-translated and verified by a human editor