US jobs and French elections

Alan Valdes
Alan Valdes

The Federal Reserve offered no surprises yesterday, leaving rates unchanged in a range of 0.75 to 1%. Traders, however, were happy with the hawkish statement after the announcement and the signal that a June hike was likely (barring any significant geopolitical issues). At the same time, they noted the economy had weakened, yet they felt the weakness was transitory and gave a positive assessment of the economy.

While the Federal Reserve neither surprised nor disappointed, Apple, on the other hand, did surprise traders Wednesday with a Q2 beat on the bottom line, but a miss on revenue. iPhone sales, the heart and soul of the company, were another miss, with sales coming in at 50.8 million vs 51.4 million. The surprise from the company was its announcement to start a $1 billion fund for the development of advanced manufacturing jobs here in the United States. Apple, which is sitting on a quarter of a trillion dollars in cash, seems to be leading the charge to bring back manufacturing jobs here in the US, an issue high on President Trump’s agenda.

With over half of S&P 500 companies reporting earning (329 companies to be exact), 77% have beat analysts’ expectations. On the revenue side, a solid 63% have beat those expectations. The earnings beat is the highest in eight quarters, and the revenue is the best in nine quarters.

With the Fed behind us for the moment, all eyes will be focused on tomorrow’s jobs number. Economists are expecting between 170,000 and 188,000 to be reported in this month’s report. ADP, which reported their numbers Wednesday, came in at 177,000, which is slightly better than analysts’ predictions of 175,000. Anything above 140,000 tomorrow will show that last month’s paltry 97,000 number was an anomaly, which could be blamed on the weather. But should tomorrow’s number come in at 120,000, that would show continued weakness in the jobs market. Traders would be ecstatic with a read of 170,000 and happy with a 140,000 low-end number.

Sunday, the focus turns to France, where Le Pen is trailing Macron by double digits. A win by Macron, the formal investment banker, would also be a win for Wall Street. Can anyone say Brexit & Trump?