Market Reaction to Employment Data

On June 6th, US stocks opened higher following the release of May's nonfarm payroll data, which showed an increase of 139,000 jobs, surpassing expectations. 

Note: As of 09:33 AM, ET, or 04:33 PM in Riyadh, the broad-based S&P 500 index(SPX.US) appreciates by 58 points or 0.97% to 5,997, the tech-heavy NASDAQ(IXIC.US) heads vastly up by 212 points or 1.1% to 19,511, and the blue-chip Dow Jones Industrial Average(DJI.US) jumps by 468 points or 1.11% to 42,788.

The unemployment rate remained stable at 4.2%, and average hourly earnings rose more than anticipated. The Dow Jones increased by 327.35 points, or 0.77%, to 42,647.09; the Nasdaq rose by 216.61 points, or 1.12%, to 19,515.06; and the S&P 500 gained 52.65 points, or 0.89%, to 5,991.95.

Employment Data Adjustments and Implications

The Bureau of Labour Statistics reported revisions for March and April, reducing job growth by a total of 95,000. March's payrolls were adjusted from 185,000 to 120,000, and April's from 177,000 to 147,000. Despite the positive headline figures for May, these revisions indicate a more subdued employment landscape.

Average hourly earnings increased by 3.9% year-over-year, exceeding expectations and raising concerns about inflationary pressures. Analysts suggest that stable unemployment and rising wages may ease fears of a significant labour market slowdown. However, the manufacturing sector saw a reduction of 8,000 jobs, contrary to the Trump administration's goals, highlighting ongoing economic challenges.

Federal Reserve and Economic Outlook

Following the employment report, traders now anticipate only one rate cut by the Federal Reserve this year. Expectations for a rate cut in September have decreased, with the likelihood of a 25 basis point reduction now below 75%. Principal Asset Management's Seema Shah noted the Fed's delicate position amid trade uncertainties, suggesting that employment stability might delay any immediate monetary policy adjustments.

The reduction in federal employment, influenced by the Department of Government Efficiency, continues to affect the labor market, with a decrease of 22,000 jobs in May. Since January, federal employment has fallen by 59,000. Analysts warn that these figures may eventually reflect in payroll data, as employees on paid leave or receiving severance are counted as employed.

Overall, while May's job growth exceeded expectations, the broader economic indicators, including layoffs and private sector employment data, suggest a cautious outlook. The market is closely watching for the impact of tariffs and potential Federal Reserve actions as the US navigates economic headwinds.

Stocks to Watch

• Tesla Motors, Inc.(TSLA.US) experienced a significant drop of over 14%. White House sources indicated that Trump has no plans to speak with Musk. Analysts at $GS lowered delivery and earnings forecasts for Tesla due to weak monthly data in key regions and poor consumer survey results. The second quarter of 2025 is expected to see deliveries of 365,000 units, down from 410,000, with full-year predictions reduced to 1.575 million in 2025, 1.865 million in 2026, and 2.15 million in 2027.
• NVIDIA Corporation(NVDA.US) is intensifying lobbying efforts with nearly US$1 million spent in the first quarter of 2025 to create favorable export conditions for its advanced AI chips amid strict government controls.
• Microsoft Corporation(MSFT.US) CEO Satya Nadella mentioned evolving collaboration with OpenAI as the latter transitions into a commercial powerhouse, ensuring revenue sharing whenever users engage with ChatGPT.
• A Boston University report highlighted that Apple Inc.(AAPL.US)'s global App Store facilitated US$1.3 trillion in developer revenue and sales in 2024, with over 90% going directly to developers, up from US$514 billion in 2019.
• Alphabet Inc. Class A(GOOGL.US) launched the preview of Gemini 2.5 Pro, set to become stable for enterprise use in weeks, continuing its lead in the LMArena rankings.
• Toronto-based Untether AI announced its team will join Advanced Micro Devices, Inc.(AMD.US), ceasing supply of its SDKs. AMD confirmed the strategic acquisition to boost its AI inference chip capabilities against competitors like NVIDIA Corporation(NVDA.US).
• Stablecoin company Circle(CRCL.US) saw its stock rise over 168% on its IPO debut.
• Broadcom Limited(AVGO.US) reported record-breaking second-quarter revenue, though AI income growth slowed.
• Virgin Galactic(SPCE.US) is resuming commercial space flights as planned.
• Yum China Holdings Inc(YUMC.US) signed a US$510 million buyback agreement.
• LI Auto(LI.US) received an increased target price from Goldman Sachs Group, Inc.(GS.US) to US$35.3, along with a three-year earnings estimate upgrade.