Lower than Expected Jobs Report May 03, 2024, Fuels the Markets Higher

Tom Gentile

Posted in
Big Picture

By: Tom Gentile
May 3rd, 2024

3 mins read

Two things that propelled the markets higher today (as of the time of this writing), are Apple Inc.’s (NASDASQ: AAPL) earnings beat and stock buyback announcement Thursday and the Jobs Report that came out this morning.

Job’s Report

The nonfarm payrolls report showed 175,000 jobs were gained in April. This is a number much lower than the 240,000 jobs expected by economists surveyed by Dow Jones.

 According to the Bureau of Labor Statistics, the unemployment rate went up to 3.9%, versus 3.8% in the prior month.

This report, which isn’t great for the jobs market, is a bit of a breather for the markets as the data shows the economy may not be running as hot as it had been and that the Fed can go ahead with their rate cut. Or, as some are speculating now, there could be two rate cuts by the end of year.

CNBC reports that per the CME Group’s Fed Watch tracker of futures market pricing, the prospect of a second rate cut this year went up to 72% where the day prior it was around 50%.

60-day Candle Chart SPY
Figure 1: 60-day Candle Chart SPY

Apple, Inc. Earnings and Stock Buyback

Thursday, after the market close, Apple, Inc. (NASDAQ: AAPL) announced earnings for their fiscal 2nd quarter.

Earnings Per Share (eps) were reported $1.53 vs. estimates of $1.51.  Revenue was reported $90.75 billion vs expectations of $89.79 billion.

AAPL beat their earnings expectations but came in lower on the revenue side.

Another piece of news this report that seems to be a big contributor to their gap up in price is their announcement of a stock buyback program to the tune of an additional $110 billion.

Tech Sector ETF Largest Gain on the Day

Take a look at the table below provided by the website www.sectorspdr.com as it shows the percentage gain on the day for the 11 S&P 500 Sector ETF’s.

Image 1

You can see the AAPL news and the resulting stock price action is helping that ETF outperform all the others.

The thing I am looking for as we close today and in the coming week(s) is will this gap up see any follow through to the upside or is this price action on SPY going to end up a price level it bumps up against as becomes resistance.

Gaps tend to get filled. The thing that is not known is WHEN and over what amount of time it will take for a gap to be filled.

For both the gap in the SPY and for AAPL are these gaps going to be a breakaway gap which may not get filled or filled quickly in which these securities ramp higher from here? Or is the fill of the gap going to happen rather quickly?

Two Options Trading Approaches

An option trader has at least two choices from here. Are you going to be 1) Aggressive and jump on this gap up with new bullish option trades anticipating further upside price action and follow-through? Or 2) be a bit more conservative and patient and wait for a pull back and fill of the gap (should it happen)?

For me, I will continue to manage my existing open trades and wait until next week before considering opening up any new option trades.

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