Zacks Investment Management

In today’s Steady Investor, we are taking a deeper dive into key market factors that we believe investors should keep an eye on, such as:

• April’s job report
• The rise in e-commerce and bricks and mortar stores
• The surge in China’s exports

Why the April Jobs Report was Good for Interest Rates – Last week, the U.S. Labor Department reported that the economy added 175,000 new jobs in April, which was well below expectations for 240,000 jobs and also marked a steep decline from March’s 300,000 payroll number. For those rooting for strong and accelerating economic growth, this jobs report came as a disappointment. It showed a loosening in the labor market, and the unemployment rate ticked higher from 3.8% in March to 3.9% in April. For the Federal Reserve and those rooting for interest rate cuts, however, this jobs report factored as a step in the right direction. For one, weaker-than-expected jobs growth allays fears that the economy could be overheating. But second, a looser jobs market means there may ultimately be less pressure on wages, which can be a key ingredient in keeping inflation sticky. For now, the April jobs report adds a bit of hope to the possibility of a rate cut this summer versus this fall, but traders in interest-rate futures still think the likelihood is below 50%. Expectations for the Fed’s first rate cut to come in September rose, however, from 60% before the jobs report to 70% after. Equity and bond markets also seemed to embrace this labor market weakness – stocks rose over 1% on the day of the release, while the yield on the 10-year U.S. Treasury bond fell from 4.569% to 4.498%.¹

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The Rise of E-Commerce Was Supposed to End Bricks and Mortar Stores. It Hasn’t, Why? – Make no mistake—the rise of e-commerce has reshaped the retail landscape, especially in the mid-2010s when e-commerce’s share of total retail sales ascended quickly. Hundreds of retailers were forced to declare bankruptcy, and shopping malls around the country shut their doors. E-commerce’s share of total sales has continued to grow since, rising from 6% in 2014 to 15.4% last year.³

E-commerce sales as a percent of total retail sales

But what many predicted would be a bricks and mortar apocalypse has not materialized, and may even be moving in the opposite direction today. Retailers have made adjustments, and are increasingly integrating their physical stores with the online shopping experience. For instance, nearly 42% of e-commerce sales in 2023 involved physical stores, as shoppers buy online to pick up in stores and as stores use existing locations to fulfill orders. All told, retailers are on track to open more stores this year than they will close, for the third consecutive year.

China’s Exports Have Been Surging in 2024. That Has Many Countries Concerned – Worries mounted last year as China’s property market showed major signs of distress, threatening to send the world’s second-largest economy into a period of below-average growth. A surge in Q1 2024 export volumes has dispelled these fears, but is also resulting in a fresh set of concerns—that rising export volumes are a sequel to the “China shock” that pummeled the global manufacturing sector over two decades. Policymakers in the U.S., Europe, and elsewhere are concerned that the Chinese government is pouring money into China’s vast manufacturing sector, thereby flooding the global economy with cheap goods that Chinese consumers don’t want. Export volumes have surged, and were 1.5% higher in Q1 2024 than they were in the same quarter last year. A chorus of overseas policymakers are warning that China is now too big to significantly ramp up its manufacturing output, and should be focused on spurring domestic demand versus growing export volumes.⁵

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