Labour market begins to worry investors

After Tuesday's relatively unexpected yet decent market growth, few seriously anticipated the same scenario to repeat on Wednesday. As is often the case, Wednesdays tend to be tense, and the outcome was particularly hard to predict. In the end, trading turned out to be nervous but largely inconclusive.

In the morning, many global stock markets – particularly in Asia – showed moderate growth on a wave of optimism about the upcoming phone call between the leaders of the U.S. and China scheduled for Friday. Whether this optimism was justified remains to be seen, but the market was clearly in a better mood.

Some support might have come from macroeconomic data published before the opening bell. Unfortunately, this did not happen. According to ADP, only 37,000 new jobs were created in the U.S. non-farm sectors in May, against a forecast of 111,000 – the weakest figure since March 2023.

Investor sentiment was further hit by disappointing quarterly results from Dollar Tree (DLTR), which reported a 50% fall in profits, mainly due to tariff impacts. As a result, the company’s shares were hit hard by bears, ending the day down more than 8% (-8.37%).

This combination of factors prevented the bulls from pushing prices higher – although the intention was certainly there. The day turned into a tough tug-of-war between buyers and sellers, ending in a draw.

The Dow Jones Industrial Average (DJIA-30) slipped 0.22%, while the tech-heavy NASDAQ Composite added 0.32%. Notably, this modest gain pushed the NASDAQ into positive territory year to date – an achievement in itself.

The main U.S. benchmark, the S&P 500, ended flat, rising by a mere 0.44 points or 0.01%. During the session, it attempted to reach the key resistance level near 6,000 points, but the move failed to hold and the index closed roughly where it began.

A similar picture was seen across the ITS index family. The ITS Shariah Index (ITSS) dipped 0.1%, while the ITS World Index (ITSW) took another small step towards a new all-time high, gaining 0.5%. Now just 3 points – or less than 0.3% – separate it from the top.

Once again, it is worth highlighting that the recent rise in the ITSW index has been driven mostly by European and Asian issuers rather than American ones. As of yesterday, only three U.S. companies – Meta Platforms (META), Eli Lilly (LLY) and Broadcom (AVGO) – made it into the top ten, and none occupied the leading spots. The best performers were NXP Semiconductors NV (NXPI) from the Netherlands and Spotify Technology S.A. (SPOT), registered in Luxembourg, which gained 5.56% and 4.47% respectively.

Still, Wednesday turned out to be an ordinary trading day that did little to shift the balance of power in the market. There are reasons to stay optimistic – such as the NASDAQ’s return to positive territory – but also reasons for caution. In particular, the S&P 500 chart appears to be forming a double top – a powerful reversal pattern in technical analysis. Whether this reversal materialises will likely become clear in the coming days.

 

 

Market outlook for 6 June 2025

Thursday’s trading session carries an underlying intrigue: can the main gauge of the U.S. stock market – the S&P 500 index – push higher and finally reach the 6,000 mark, now just half a percent away? Or will technical analysis prove correct, with the emerging double top pattern leading to another correction?

Looking at global stock markets on Thursday morning, investor sentiment appears mostly neutral to mixed. There are no strong moves, and most indexes are hovering near the flatline – some slightly up, others modestly down. Even futures on major U.S. indexes are moving in sync: initially dipping by a few tenths of a percent, then recovering into positive territory with similarly modest gains. In short, the market is standing still for now and in no rush to make a decisive move.

But there are several important checkpoints ahead that must be navigated without losses. The most critical of these is the release of the traditional Thursday data on jobless claims. While “traditional” does not mean insignificant, these figures had recently lost some of their market-shaping power, as the U.S. labour market remained stable and largely untroubled. However, last week saw a sharp rise in initial claims to 240,000, and yesterday’s weak ADP employment report has stirred fresh concern.

The labour market is clearly starting to show cracks, which could have serious long-term consequences. That is why today’s Initial Claims data will be closely watched. If it reveals further deterioration in employment conditions, the market could respond sharply and negatively. That said, analysts are predicting a slight decrease in claims compared to last week – down to 236,000 – which offers some reassurance.

In addition, investors will be paying close attention to two high-profile companies – semiconductor giant Broadcom (AVGO) and athletic apparel retailer Lululemon (LULU). Both are scheduled to release quarterly earnings after the closing bell, and the results could sway market sentiment. Broadcom in particular will provide insight into demand for cutting-edge AI chips.

Some investors are concerned that businesses may scale back AI spending amid uncertain economic conditions. Adding to the unease is the emergence of a low-cost chip model from Chinese company DeepSeek, which may signal a shift in spending behaviour. Still, major tech firms have recently reaffirmed their plans to pour substantial investment into AI technologies.

Back in March, Broadcom’s CEO sought to dispel these concerns, forecasting $4.4 billion in Q2 revenue from AI semiconductor sales. This figure is expected to be supported by hyperscale clients investing heavily in custom AI chips for data centres. Whether these expectations align with reality will be revealed in today’s earnings report.

Taking all of this into account, the day ahead promises to be intense and eventful. Buyers will likely attempt to pull the market to new heights – but whether they succeed remains to be seen.