As the earnings season wraps up, investors are turning their attention to economic data, and especially the job market.
Equity exchange traded funds (ETFs) jumped out of the gate last Friday after a solid nonfarm payrolls report for April soothed investor fears about the strength of the economic recovery. [S&P 500 ETF Rallies to Fresh Recovery High.]
On Thursday, markets will get figures on weekly jobless claims. Any figure over 500,000 would spook investors and create serious worries about the jobs market.
SPDR S&P 500 ETF (NYSEArca: SPY) is up about 7% this year. In order for the rally to sustain, employment data must show a turnaround. Last week, applications for jobless benefits were down 44,000, to 434,000, according to Labor Department figures. This was 4,000 higher than what analysts were calling for, reports Alex Kowalski and Timothy R. Homan for Bloomberg. [Stock ETFs Rise After Upbeat jobs Report.]
Although the numbers seem to be trending in the right direction, investors would like to see weekly jobless claims drop below 400,000.
The payrolls in the U.S. have expanded for seven consecutive months, as the number of firings has dropped, helping to shore up consumer confidence and giving some hope for this Thursday’s numbers.
“Probably the key thing here is the ongoing weakness in initial claims. A reading above 400,000 on the four-week average verifies what the Fed has been saying about the weakness in the labor market and therefore the recovery, ” says Andrew Wilkinson, Senior Market Analyst, at Interactive Brokers Group.
Tisha Guerrero contributed to this article.