The stock market closed the week mixed in a choppy session as market participants watched a potential recession indicator in the bond market and strong labor market data that reaffirmed expectations that the Fed will continue aggressively tightening monetary policy. The price of oil continued its decline, falling below $100 a barrel as the US initiated the largest release of oil reserves ever. 

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President Biden unveiled plans to release 1 million barrels of oil a day starting May for the next six months. This is the largest release of reserve petroleum ever in an effort to fight spiking energy prices. Oil spiked to as high as $130 earlier in the month, leading to record prices at the pumps. Meanwhile, West Texas Intermediate (WTI) crude oil fell $14 to dip below $100 per barrel in its biggest weekly dollar loss since 2011.

President Biden said, “This is a moment of consequence and peril for the world, and pain at the pump for American families. Our prices are rising because of Russian President Vladimir Putin’s actions,” he said. There isn’t enough supply. And the bottom line is if we want lower gas prices we need to have more oil supply right now.” While this is not entirely true (the price of oil had been rising even before), the price of oil dramatically spiked following Russia’s invasion of Ukraine on February 24. 

Despite the recent rally, the market continues to face a number of headwinds. Investors are nervously eyeing a flattening yield curve, with longer-duration bonds yields falling below shorter-term term yields. 

The spread, or difference, between the 2-year and 10-year Treasury note yields narrowed to its lowest level since 2019 earlier this week and briefly inverted on Tuesday. A yield curve inversion has a history of predicting a recession, with each of the last eight recessions dating back to 1969 preceded by a yield curve inversion.

The Labor Department’s closely watched employment report on Friday also showed more people joining the workforce, likely attracted by the higher wages. Employment in professional and business services, financial activities and retail sectors is now above pre-pandemic levels.

The 11th straight month of job gains in excess of 400,000 underscored the economy’s resilience even as growth appears to have slowed considerably in the first quarter under the weight of high inflation amid snarled supply chains. Here are the numbers:

  • Nonfarm payrolls increase 431,000 in March
  • February payrolls gain revised up to 750,000 from 678,000
  • Unemployment rate falls to 3.6% from 3.8%
  • Average hourly earnings rise 0.4%; up 5.6% year-on-year
  • Employment in some sectors now above pre-pandemic levels

Sal Guatieri, senior economist at BMO Capital Markets said, “Despite concerns about inflation and the Russia-Ukraine war, American businesses are still hiring at full throttle, while more people are returning to the labor force. That’s great news for the economy. However, the labor market is only getting tighter and wages are on a clear upward track, fanning the inflation flames. The Fed has every reason to go big or go home on May 4.”

Yesterday, In its monthly private payroll report, ADP reports payrolls rose by 455,000. Consensus economists were looking for 450,000 jobs to return, according to Bloomberg data. In February, employers brought back 486,000 payrolls, based on ADP’s upwardly revised monthly print.

April has historically been a strong month for stocks, and has in fact produced a positive return for the S&P 500 in 15 of the last 16 years, according to LPL Financial’s Ryan Detrick. This time, however, stocks are facing a variety of headwinds that may upend this historically positive seasonality.

The markets are gacing a confluence of geopolitical and economic headwinds, which contributed to the S&P 500’s worst quarterly performance in two years. After Russia’s invasion of Ukraine, already disrupted supply-chains have been further snarled. Broad price inflation makes goods of all kinds, hitting consumers, the key drivers of the economy, squarely in the pocket. In response to elevated inflation, the Federal Reserve has begun its tightening cycle by raising the interest rate and reducing its balance sheet. 

Highlights

  • Gamestop (GME) surged after-hours after the company announced plans for a share split, but was unable to hold gains during the session, falling back to roughly even.
  • Employees at Amazon’s (AMZN) warehouse on Staten Island narrowly won a historic union election on Friday to establish the first U.S. union in the company’s nearly 30-year history.
  • U.S.-allied countries in the International Energy Agency (IEA) agreed to their second coordinated deployment of oil stockpiles in a month 
  • Shares of General Motors (GM) dipped after the automaker reported its U.S. deliveries fell 20.1% in the first quarter to 512,846, dragged down by Buick deliveries which more than halved.
  • Sales of new electrified vehicles in France overtook petrol-powered equivalents for the first time in the first quarter, a major milestone for lower-emission vehicles amid high prices at the pumps and government subsidies for EVs.
  •  Ford Motor (F) is recalling 737,000 vehicles in the United States over a part that could develop an oil leak and a software error that could hinder braking, it said on Friday.
  • New York-listed Chinese stocks jumped Friday after a report that China is considering sharing key information that would allow the firms to continue trading publicly in the U.S.
  • Beijing regulators are working to give U.S. authorities complete access to audits of Chinese companies listed publicly in New York, Bloomberg reported

“The question isn’t who is going to let me; it’s who is going to stop me.” –Ayn Rand