Bank Stress Tests Raise Optimism, Will Non-farm Payrolls Reverse Sentiment

U.S futures have traded higher throughout overnight trading as the bank stress test results helped fuel increasing risk appetite ahead of the labor report.

What To Watch For In The US Session

•    Non-farm Payrolls
•    Bank Stress Test Raise Optimism
•    Unemployment May Rise to 25 Year High

Bank Stress Tests Raise Optimism, Will Non-farm Payrolls Reverse Sentiment

U.S futures have traded higher throughout overnight trading as the bank stress test results helped fuel increasing risk appetite ahead of the labor report. The government revealed that several of the banks would need to raise additional capital through issuing common shares, but the amounts were less than estimated for names like Citibank and Wells Fargo. Meanwhile, several financial institutions including Goldman Sachs were found adequately capitalized and subsequently broadcasted their intentions of repaying borrowed TARP funds. However, one of the parameters for the worst case scenario that the results were based on was unemployment at 8.9% in 2009, which is exactly the rate that is forecasted for today’s labor report. Therefore, if we see the percentage of unemployed rise above that level today; it could bring into question the validity of the findings. Yet, if we see job losses in April below the 600,000 that is forecasted, then we could see optimism soar and stocks resume their upward trend.  This could be the case with initial jobless claims falling and the ADP report showing private job losses slowing.

Dow Jones     8409.85
The DJIA futures have remained in positive territory as expectations are rising that we could see a significant improvement in today’s labor report

NASDAQ      1716.24
The Nasdaq saw profit taking in tech names ahead of the bank stress test results. Now that it has come and gone without any raising any major concerns, we could see support return for the tech sector. 
       
S&P 500      907.39
The S&P 500 could get a big boost from a strong labor report, but if we see the unemployment rate shoot above 9.0%, it could sink the outlook for domestic growth and lead the broader index lower.