Stock futures rise before first session of April, jobs report

U.S. stock futures opened slightly higher Thursday evening as traders looked ahead to the start of a new month of trading and a closely monitored new economic report on the state of the labor market.

Contracts on the S&P 500 edged up to kick off the overnight session. The index fell for a back-to-back session on Thursday, limping into the final session of March and the first quarter.

Investors on Friday are set to closely monitor the Labor Department’s monthly jobs report, offering the most up-to-date snapshot of the strength in hiring across the U.S. economy. Consensus economists are looking for non-farm payrolls to rise by 490,000 for March, according to Bloomberg data, slowing from February’s 678,000 gain but still marking an increase well above pre-pandemic trends. The unemployment rate is expected to dip to 3.7%, or to the lowest since February 2020.

Stocks are heading into April following a volatile month and quarter of trading. The S&P 500 and Dow each dropped more than 4.5% for the first three months of 2022, closing out their worst quarters — and first quarterly declines — since the first quarter of 2020. The Nasdaq Composite fared worse as investors rotated away from technology and growth stocks that had led the market higher last year, and the tech-heavy index shed 9.1% during the first quarter.

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.

Namely, a confluence of concerns around the geopolitical and macroeconomic backdrop contributed to stocks’ worst quarterly performance in two years, and have yet to be fully resolved. Geopolitical risks have been elevated since Russia’s invasion of Ukraine in late February, raising the specter of further snarls to global supply chains that have already been struggling to recover from pandemic-era disruptions. A broad-based spike in prices, and in oil and energy prices especially, has further stoked concerns over the resilience of the consumer — the key driver of the domestic economy — going forward. And the Federal Reserve has begun a protracted process of raising interest rates and tightening financial conditions in a market that had grown accustomed to easy monetary policy since 2020.

“I think investors are very happy that the quarter is over. It was a tough one. Obviously inflation was bad all the way until … the end of the quarter,” Robert Cantwell, Upholdings portfolio manager, told Yahoo Finance Live on Thursday. “And in all likelihood, the next four to six weeks, it’s likely going to continue to be bad news because inflation is persistent, and we’re still comping record growth rates from the first four months of last year.”

“That said, as you get to the second half of next quarter, you could see a scenario where growth rates start accelerating again while inflation tempers, and that has the potential to bring a lot of the bulls back into the market,” he added.

LPL Financial points out that corporate profits may be another component driving the latest rebound in equities. Even in the face of war in Eastern Europe and decades-high inflation, earnings have been holding up, and estimates for S&P 500 Index earnings per share over the next four quarters are higher in March. Although not by much at 1.5%, the positive forecast is significant under the circumstances – particularly compared to how other countries have fared. Inflation is driving the more sizable corporate profits as companies enjoy more pricing power as they pass along higher costs to customers.

“On the back of energy independence, the trajectory of U.S. corporate profits has been unaffected by rising energy costs and high inflation so far,” LPL Financial equity strategist Jeffrey Buchbinder noted, adding that conversely, earnings expectations in international markets have fallen in March. “The U.S. profit outlook is the envy of the world right now.”

Elsewhere on the companies front, meme-stock favorite GameStop revealed in a form 8-K filed with the SEC after the bell Thursday that the video-game retailer will seek approval for a stock split at its upcoming shareholder meeting. GME is following a growing list of major companies — Alphabet, Amazon, Tesla — it what could be the “summer of stock splits.” Stock splits are a corporate action taken to improve trading liquidity and make shares more affordable without impacting market capitalization. GME rallied as much as 20% in extended trading to a 4-month high of more than $200 per share following the news.

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