Wall Street jumps ahead of the jobs report

Wall Street rose Friday ahead of new US jobs data after a tough week for banks caught up in the Fed’s fight against inflation.

Futures for the Dow Jones Industrials rose 0.5% before the bell and the S&P 500 rose 0.7% higher.

Regional banks that saw huge drops in their share price on Thursday are recovering in premarket trading. PacWest Bancorp, whose shares lost half of their value on Thursday, rose nearly 20% before the bell Friday. Western Alliance Bancorp was up 13% in premarket after plunging 38% Thursday.

The financials sector is the strongest component on the S&P 500 in early trading. Still, the S&P MidCap 400 Banks Index is down 14% in the week following First Republic Bank’s collapse on Monday.

Los Angeles-based PacWest Bancorp said it is selling assets and has been approached by potential partners and investors.

Regulators seized First Republic and sold most of it to JPMorgan Chase and shares of financial institutions fell despite assurances from government and industry officials that the banking system is sound.

The US government is releasing employment data in April that is expected to show a slowdown in job growth. The red-hot job market is one reason the Fed has raised interest rates in an effort to cool the economy and inflation.

We estimate a slowdown in net job growth and an increase in the unemployment rate, Rubeela Farooqi of High Frequency Economics said in a report.

Traders foresee at least a brief US recession this year. They expect the Fed to start cutting rates in the second half of the year to support economic growth, though Chairman Jerome Powell said this week he doesn’t see the cuts coming that early.

A report released Thursday showed that the number of U.S. workers filing for unemployment last week accelerated a little more than expected.

The Fed indicated on Wednesday that it might be done with rate hikes for now, but European Central Bank President Christine Lagarde said on Thursday that we are not pausing. The ECB announced another rate hike, but with a smaller margin of a quarter of a percentage point.

On Thursday, the S&P 500 index fell 0.7% after investors worried about the health of banks following three high-profile bankruptcies in the United States and one in Switzerland. The Dow fell 0.9% and the Nasdaq fell 0.5%.

Investors want to know what steps authorities can take to limit further contagion risks, IG’s Yeap Jun Rong said in a report. Any inaction over the weekend could translate into a gloomier risk environment starting next week.

Rate hikes by the Fed and other central banks in Europe and Asia have put pressure on banks as market prices of bonds on their books have fallen. Investors worry that depositors could withdraw money from lenders thought to be in trouble, adding to their financial strain.

On Wednesday, the Fed raised its key overnight interest rate from near zero early last year to a range of 5% to 5.25%.

Despite all the worries about banks and a possible recession, the stock has helped to have a better-than-feared season for earnings reporting.

Companies in the S&P 500 are still on track to report earnings declines for the second quarter in a row, but results tend to be better than expected.

By noon in Europe, the FTSE 100 in London was up 0.6%, the DAX in Frankfurt was up 0.9% and the CAC 40 in Paris was up 0.6%.

In Asia, the Shanghai Composite Index lost 0.5% to 3,334.50 while Hong Kong’s Hang Seng gained 0.5% to 20,049.31. The S&P ASX 200 in Sydney rose 0.4% to 7,220.00.

The Indian Sensex fell 0.8% to 61,261.70. The markets in New Zealand and Southeast Asia fell.

In energy markets, US benchmark crude rose $2.15 to $70.71 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 4 cents to $68.56 on Thursday. Brent crude, the price base for international oil trading, added $2.08 to $74.58 a barrel in London. It was up 17 cents the previous session to $72.50.

The dollar rose to 134.25 yen from 134.14 yen on Thursday. The euro fell from $1.1016 to $1.1010.

McDonald reported from Beijing; Ott reported from Silver Spring, Md.

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