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Investors Rotate From Small Caps Into Bonds Ahead of Nonfarm Payrolls


Today's financial recap and tomorrow's financial outlook.

Most European and Asian markets were closed today for the May Day and International Workers' Day holidays. As a result, volume was on the lower side.

The national ISM manufacturing index rose to 54.9 in April from 53.7 last month and ahead of the 54.3 expected. Equity markets generally rallied as a result, but US Treasuries continued to rally as lower growth expectations were priced in and reduced inflation pressure was noted in the "prices paid" portion of the index. The 10-year yield fell 3.5 basis points today to 2.61% after reaching its lowest level since last October during the session. Weekly jobless claims for last week rose to 344,000 from 330,000 the week prior, possibly due to seasonal adjustments around the Easter holiday.

Amid the mixed broader action, there were some pockets of strength. Housing stocks outperformed the major averages, and social media had a very strong day. The Global X Social Media Index ETF (NASDAQ:SOCL) finished up 2.5% as stocks such as Facebook (NASDAQ:FB) headed higher following a week of mostly sideways action. The S&P 500 (INDEXSP:.INX) ended the day only down 0.02%, but small-cap stocks came under pressure as investment funds rotated into fixed income. The materials sector lagged behind the broader index while telecom stocks led.

In earnings news, we saw better-than-expected reports from MasterCard (NYSE:MA) and Goldcorp (NYSE:GG) and misses from ExxonMobil (NYSE:XOM) and Sally Beauty (NYSE:SBH).

Tomorrow's Financial Outlook

The main event tomorrow will be the April government nonfarm payrolls report. Economists expect that the US added a net 218,000 jobs in the month after a gain of 192,000 last month. The unemployment rate is forecast to drop to 6.6% from 6.7% last month. Earlier this week, the ADP private payrolls report showed a gain of 220,000 jobs this month. March factory orders are due out, but the payrolls report will dominate the morning's trading.

Japan will also report its employment data overnight, with economists expecting its unemployment rate to stay unchanged at 3.6%. Also scheduled for tomorrow is the final estimate of eurozone manufacturing PMI and its March unemployment rate. Because much of the individual eurozone countries have already reported their unemployment rates for the month, there's little chance for a surprise.

Wrapping up the week, Chevron (NYSE:CVX), CVS Caremark (NYSE:CVS), Madison Square Garden (NASDAQ:MSG), and KCG Holdings (NYSE:KCG) are the notable US companies scheduled to report earnings tomorrow.

Twitter: @Minyanville

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