TECH - A Golden Opportunity to Enter U.S. Stock Markets: 5 Top Picks | Benzinga
The 15-month bull run of U.S. stock markets suffered a surprise setback in April. The Dow plunged 5%, marking its worst monthly performance since September 2022. The S&P 500 slid 4.2% and the Nasdaq Composite tumbled 4.4%. All three major stock indexes terminated a five-month winning streak. April is historically known as being favorable to Wall Street investors.
We believe, April's meltdown is nothing but a bull market correction and this time a welcome one. After a disappointing month, May opens a golden opportunity to enter the equity market for those investors suffering from the FOMO (fear of missing out) syndrome. Finally, recently released economic data boosted market participants' confidence in equities.
Resilient Labor Market Shows Signs of Softness
The Department of Labor reported that the U.S. economy added 175,000 jobs in April, missing the consensus estimate of 200,000. Job additions in March were revised upward by 12,000 while those of February were revised downward by 34,000.
The unemployment rate increased to 3.9% in April, compared with the consensus estimate and March's data of 3.8%. April marked the highest level since January 2022. Moreover, real unemployment rate (including discouraged workers and those holding part-time jobs for economic reasons) edged up to 7.4%, its highest level since November 2021. The labor force participation rate was unchanged at 62.7% in April.
Month over month, the average hourly earnings rate dropped to 0.2% in April, compared with the consensus estimate and March's data of 0.3%. Year over year, the wage rate increased 3.9% in April, below the consensus estimate of 4%. The average workweek decreased to 34.3.
U.S. Economy is Cooling
The Department of Commerce reported that U.S. GDP grew at a 1.6% annualized rate in first-quarter 2024, well below the consensus estimate of 2.5%. Moreover, the Institute of Supply Management reported that both manufacturing and services PMIs (purchasing managers' index) contracted in April.
The manufacturing PMI for April came in at 49.2% and that of services PMI was 49.4%. Any reading below 50% indicates contraction in activities. The manufacturing PMI expanded in March after 16 consecutive months of contraction. It again contracted in April. The services PMI contracted in April after 15 successive months of expansion.
Expectations of Interest Rate Cut Rise
Following the release of the April's nonfarm payrolls, the CME FedWatch shows a 67.4% probability that the central bank will cut the benchmark lending rate by 25 basis points in the September FOMC meeting. The interest rate futures tool also shows a massive 91.5% probability that the Fed will cut rate by 50 basis points. Notably, the Fed fund rate currently ...