Stock market today: Stocks fall after April jobs report

On the heels of their worst session of 2022, stocks initially struggled to find direction on Friday following the release of April’s jobs report – although ultimately they fell again happy to sell.

The Labor Department said this morning that the United States added 428,000 jobs last month, while the unemployment rate held steady at 3.6%. This is the 12th month in a row that US employers have added at least 400,000 new jobs. At this rate, the economy could recoup all of its pandemic-related job losses by mid-July, says Kiplinger economist David Payne.

Also noteworthy in the report is wage growth, which rose 0.3% month-over-month and 5.5% year-over-year, and participation rate – or the percentage of the population that has a job or is looking for one – which fell slightly to 62.2%.

“While there’s no shortage of worry about clipping investors’ sails right now, this jobs reading likely won’t be one of them,” said Mike Loewengart, chief strategy officer at investment at E*Trade. “With a relatively rosy jobs picture, despite slight gaps on participation and wages, the Federal Reserve is unlikely to be swayed by its rate hike campaign. And since the numbers are mostly in line with expectations, the market may have already priced in a robust jobs reading.”

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Shares initially opened lower before rallying midday. These intraday gains were short-lived, however, with all three markets falling back into negative territory in the afternoon.

At the close, the Nasdaq Compound was down 1.4% at 12,144, the S&P 500 Index was 0.6% lower at 4,123 and the Dow Jones Industrial Average was down 0.3% at 32,899.

Other news on the stock market today:

• Small cap Russell 2000 plunged 1.7% to 1,839.
• U.S. crude oil futures gained 1.4% to end at $109.88 a barrel.
• Gold Futures Contracts rose 0.4% to $1,882.80 an ounce.
• Bitcoin fell 0.9% to $35,953.66. (Bitcoin trades 24 hours a day; prices shown here are as of 4 p.m.)
• DraftKings (DKNG) plunged 8.9% after the online sports betting company reported a first-quarter net loss of $467.7 million, higher than the $346.3 million net loss it suffered a year ago. On an adjusted basis, however, DKNG’s adjusted per-share loss of 74 cents was lower than the $1.09 per-share loss analysts expected. Revenue of $417 million is above the consensus estimate of $412 million. “The DraftKings quarter was buoyed by strong March Madness and Super Bowl numbers, which set records for new bettors,” said Jonathan Dube, executive-in-residence at investment bank Progress Partners. “DraftKings and its competitors are all looking for ways to grow their business and increase their margins, and one of the ways they’re doing that is by aggressively moving into the iGaming online casino space. DraftKings announced that it had completed its purchase of Golden Nugget Online Gaming, which will help it compete with established brands like Caesars and BetMGM in the iGaming space, a strategically complementary business that has higher margins than sports betting.”
• In the first quarter, the global cloud services provider Cloudy (NET) reported revenue of $212.2 million, up 54% year-over-year, and adjusted earnings of 1 cent per share, compared to a loss per share of 3 cents at the same time last year. Still, NET stock plunged 12.4% after earnings, possibly due to the company reporting operating cash flow of -$35.5 million for the three-month period. vs. +$23.5M in Q1 2021. “The company beats the best point solutions with its easier-to-use, less expensive bundled solutions, all on a single development platform — the workers,” says the Oppenheimer analyst Timothy Horan (Perform). “He played a major role in protecting the digital infrastructure of Ukraine and other countries from Russian attacks.” Horan also thinks Cloudflare “should be in able to deliver double-digit revenue growth rates over the next few years based on the strong demand for its offering and the growing economic importance of the Internet around the world.”

Wall Street’s New Dividend Payers

The Fed is unlikely to change course with its monetary tightening plan anytime soon. That seems to be the general consensus around Wall Street, especially on the heels of today’s strong jobs report.

“We’ve been cautious all year given the unprecedented size of the Fed’s balance sheet, which it needs to unwind from the inflationary pressures we’ve faced and concerns that valuations are too high as interest rates were about to go up,” says Chris Zaccarelli, chief investment officer for registered investment adviser Independent Advisor Alliance. Zacarelli thinks the Fed will continue to “aggressively fight inflation” no matter how much damage the stock market may be inflicted in the short term.

With this in mind, he reminds investors that it is prudent to invest in quality stocks of companies capable of weathering a recessionary environment. This includes companies “with a competitive advantage, pricing power, and a strong balance sheet (e.g., relatively low debt to operating profit),” Zaccarelli adds.

There are many ways for investors to find companies with high-quality fundamentals, including looking for those that consistently increase their dividends or issue special dividends, both signs of financial strength.

There’s also money to be made with the new dividend-paying stocks on Wall Street. Despite a US economy plagued by labor shortages, supply chain issues and higher prices, these companies are showing financial strength by initiating dividends.