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05 Apr 2021
2 min read

Futures Jump with Dow Ahead After a Strong Jobs Report

Futures Jump with Dow Ahead After a Strong Jobs Report

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Key Takeaways

  • US stock futures point to a higher open, Dow futures at the lead, up around 0.60%
  • Uplifting jobs report fuels optimism for a sharp economic rebound

US equity futures shot higher in pre-market trading hours on Monday as market participants cheered the better-than-expected payroll data for the last month. The figures from the Labor Department showed nonfarm payrolls increased by 916,000 in March. This indicates a strong economic rebound. The report beat the consensus estimate of 660,000, while unemployment fell from 6.3% to 6%.

Soon after US futures opened for trading, the Dow Jones Industrial Average jumped over 200 points or roughly 0.60%. It was boosted by reopening hopes as investors expect the economic reopening to lead to a lift of cyclical stocks. This includes banks, airlines, and others that rely mostly on consumer spending. Futures of the other two benchmarks, the S&P500 and the Nasdaq Composite, rose more modestly. The S&P500 rose higher, at about 0.50%, while the tech-heavy Nasdaq climbed 0.30%.

The surge in US hiring in March served as evidence that the economic recovery accelerated by the end of the first quarter. Throughout this, President Joe Biden signed off on the long-anticipated fiscal stimulus bill worth $1.9tn. The big-ticket spending, according to the White House, should have started creating job growth right out of the gate. In total, estimates point that it should account for the creation of as many as 7 million new jobs in the market.

A Bounce Back on the Horizon?

The March jobs report is the highest since August 2020, while the unemployment rate is the lowest since the pandemic began more than a year ago. Presently, there are around 8 million jobs less than in February 2020 when the jobs market was at its pre-pandemic highs. Friday’s job report showed hiring climbed the most in restaurants and hotels, a gain of 280,000 jobs. The construction and manufacturing sectors also marked an increase.

Following the encouraging jobs report, US government bond yields moved higher. The yield on the 10-year Treasury note climbed to 1.721%, compared with 1.680% on Thursday. US Treasury yields have been moving sharply to the upside recently, aided by a positive economic outlook.

The significant job rebound shows that pent-up demand is unfolding as the coronavirus wave subsides. The latest figures to lead the economy higher were prompted by the lifting of business and social restrictions across the states. Moreover, the vaccination pace remains high with about 165mn Covid-19 vaccine doses administered so far in the US.

The market has been on a tear so far in April. The S&P 500 topped the 4,000 milestones for the first time by gaining more than 1% and the Dow Jones is also shooting higher, underpinned by investors’ appetite for real-economy stocks.

The newly proposed economic plan by President Biden boosted hopes for a swifter economic bounce back. Last week, Mr. Biden introduced his multitrillion-dollar infrastructure proposal, centered on fixing roads, bridges, airports, funding projects for electric vehicle use, and expanding broadband internet access, among other measures. To fund the project, the President will partly rely on a hike in the corporate tax rate, which is set to be increased from 21% to 28%, if the proposal is approved.