The big news of this Friday, May 7, has been the April jobs report. While experts forecasted an addition of 1 million jobs in the US, on average, the number came in well below expectations: 266,000.
If the employment numbers paint a grimmer picture of the economy than many had in mind, this should be bad news for equities, right? Instead, Apple stock (ticker $AAPL) traded higher by 1.2% early in the session, while the tech-rich Nasdaq climbed even higher.
When bad news is good news
This seems to be a discrepancy, at first. A robust workforce should mean more discretionary spending, which bodes well for the iPhone maker. But, at the same time, a weaker-than-expected recovery means that the safety net will likely remain in place for longer.
Fiscal and monetary stimuli (think direct payments from the federal government and lower interest rates sponsored by the Federal Reserve) have been a crucial piece of the 2020-2021 economic rebound. Too good a jobs number would have meant less of a need for a lifeline.
The 266,000 jobs reported on Friday probably fell within a goldilocks zone of sorts: not too high to signal a pullback in fiscal and monetary support; but not too low to suggest that the economic recovery has been crumbling.
Market action supports the thesis
A look around shows that this is, in fact, how investors digested this Friday's jobs numbers. The most relevant signs come from the bond markets.
The 10-year treasury yield dropped 2 basis points to 1.54%. On the other hand, inflation-protected government bonds (ticker $LTPZ) failed to gain traction. This could be a sign that inflation expectations have tamed a bit, in the face of more modest employment figures, while rates are projected to stay low.
The drop in yields is what probably made other risk assets more compelling. Not only did the major stock indices climb, gold did as well. With rates low for longer, owning an asset that does not produce cash or income becomes a better bet.
Where Apple stock stands
With the Friday morning action, Apple stock is now worth more than $130 apiece once again. Below are a few other interesting metrics on the shares.
- Down 1% for the year vs. the S&P 500's 14% and the Nasdaq's 7% gains.
- Down 8% to 9% from the January peak of $143 per share.
- Worth about $2.2 trillion, about $275 billion more than the second most valuable US-based company, Microsoft (ticker $MSFT).