The strength of the U.S. labor market will give Wall Street’s interest rate relief a reality check on Friday, but Apple’s monster share buyback has buoyed the market in advance.
The world’s second biggest company by market capitalisation wowed the gallery overnight with a whopping $110 billion stock buyback program – the biggest in the iPhone maker’s history – and upped its dividend by 4% after a modest first quarter earnings beat.
The news lifted Apple shares 6% in out-of-hours trading and helped S&P500 futures extend Thursday’s near-1% index rally ahead of today’s open.
It’s also strengthened the tailwind from this week’s Federal Reserve meeting, which has calmed the Treasury market considerably by quashing creeping fears of another interest rate rise and surprising with a big taper of the Fed’s balance sheet runoff.
The upshot is that futures markets have bumped up full-year Fed easing expectations to 40 basis points on Friday – 10 bps more than was priced just before the Fed meeting. And two-year Treasury yields have fallen to three-week lows below 4.90%.
The big test of that more relaxed view now comes from the April U.S. employment report later. Private sector payroll readings for last month and jobless claims updates this week show little give yet in a still-tight labor market – even though ebbing job openings data for March added a twist.
U.S. non-farm payrolls are forecast to have risen 243,000 last month, only marginally cooler than the 303,000 added in March. The unemployment rate is expected to hold steady at 3.8%, while annual average earnings growth is seen cooling to 4.0%.
