5 things to know before the stock market opens on Thursday, May 5
Here are the most important news, trends and analysis that investors need to start their trading day:
1. Wall Street may fall after a strong Fed rally.
A Fed rate announcement is displayed on a screen as a trader works at a post on the floor of the New York Stock Exchange (NYSE) in New York, USA, May 4, 2022. REUTERS/Brendan McDermid
Brendan McDermid | Reuters
U.S. stock futures tumbled on Thursday, a day after a strong rally in the Federal Reserve pushed Wall Street up for a third straight session. The Dow Jones Industrial Average rose 932 points, or 2.8%, after Fed Chairman Jerome Powell ruled out a 75 basis point future interest rate hike. The S&P 500 gained nearly 3%. The Nasdaq added about 3.2%. Investors on Wednesday took it easy on the widely anticipated 50 basis point Fed rate hike.
- The 10-year Treasury yield edged up on Thursday, trading around 2.95%. The benchmark yield topped 3% on Monday, the highest level since the end of 2018. It also traded above that level again on Wednesday morning ahead of the end of the two-day May Fed meeting.
- OPEC+ on Thursday announced another modest increase in output in June after the EU laid out a proposal to ban oil production in Russia. However, oil prices still rose more than 1% after the announcement.
2. The Fed raises rates by 50 basis points, but refuses to further increase
Federal Reserve Chairman Jerome Powell speaks at a news conference following a meeting of the Federal Open Market Committee on May 4, 2022 in Washington, DC.
Vin McNamee | Getty Images
After raising the rate by 25 basis points in March, the first increase in more than three years, the Fed doubled that Wednesday afternoon to fight what Powell later called in his post-meeting press conference. “too high” inflation. The 50 basis point rate hike was the biggest Fed rate hike since 2000.
- Barring a larger 75 basis point rate hike going forward, Powell said a 50 basis point rate hike is being considered at the next two meetings in June and July. Campaigns are also observed in September, November and December.
- Along with the rate hikes, central banks on Wednesday said they would start cutting $9 trillion in assets on the Fed’s balance sheet.
3. Key data on the labor market will be released in the next two days
Pedestrians walk past a “Now Hiring” sign in Arlington, Virginia on March 16, 2022.
Stephanie Reynolds | AFP | Getty Images
Wednesday’s sharp rise in the market suggests that investors, at least for now, are more convinced that the Fed can curb inflation without triggering an economic recession. The next two days will bring key data on another pillar of the Fed’s dual mandate to promote price stability and maximum employment.
- The government announced this on Thursday Initial jobless claims rose more than expected to 200,000. The government’s April employment report will be released on Friday, and traders will see if Powell’s assertion that “the labor market continues to strengthen and is extremely tight” is confirmed.
- Labor productivity fell by 7.5% in the first quarter more than expected, the biggest decline since 1947, according to the latest government figures. Unit labor costs in non-farm enterprises rose more than expected by 11.6% in the first quarter.
4. Musk receives funding from investors, including Larry Ellison, at the request of Twitter.
Elon Musk during an event at the SpaceX headquarters in Hawthorne, California, USA on Thursday, October 10, 2019.
Bloomberg / Getty
Elon Musk has blocked $7.14 billion in funding from a group of investors that includes Oracle co-founder Larry Ellison and Sequoia Capital to fund his $44 billion deal to privatize Twitter, according to a filing Thursday. Saudi investor Prince Alwaleed bin Talal, who initially opposed the buyout, also agreed to put his $1.89 billion stake in the deal rather than cash it out, as shown in the filing. Musk, CEO of Tesla and SpaceX, will continue to negotiate with existing Twitter shareholders, including co-founder and former CEO Jack Dorsey, to contribute equity in the proposed acquisition, the filing said.
5. EBay and Etsy fell on a weak outlook, caught in an e-commerce reset.
A sign at eBay’s headquarters in San Jose, California, USA on Monday, August 9, 2021
David Paul Morris | Bloomberg | Getty Images
Etsy shares fell more than 12% in premarket Thursday, and eBay shares fell 7% the morning after each online marketplace posted weaker-than-expected forecasts. Inflation and a return to pre-COVID-19 shopping habits have been among the factors weighing on the outlook for Etsy and eBay. Etsy equaled and outperformed in revenue. Ebay is hitting revenue and earnings.
- After two years of overgrowth in e-commerce companies, investors are bracing for a slowdown, especially as the economy continues to reopen and consumers return to stores. Even Amazon, which has been expanding rapidly during Covid, is not immune to an e-commerce reboot.
— CNBC Tanaya Machil, Jessie Pound, Samantha Subin, Vicki McKeever, Sam Meredith, Jeff Cox and Annie Palmer and Reuters contributed to this report.
— Register Now for CNBC Investing Club to follow every move in Jim Cramer’s stock. Follow the wider market action like a pro on CNNBC Pro.