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Nasdaq, S&P 500 Futures Narrowly Mixed Ahead Of Friday's Jobs Data: Analyst Sees Fed Retaining 'Rate-Raising Bias' If Number Remains Strong

Benzinga · 01/06/2023 06:03

U.S. stocks look set for another nervous start on Friday, as the index futures traded narrowly mixed. The mood reflects the apprehensions of traders as they look forward to each piece of incoming economic evidence to draw cues on the Fed rate outlook.

What Happened: On Thursday, the major averages opened lower and moved broadly sideways before ending the session notably lower, with techs once again leading from the front.

See Also: Futures Investing For Beginners

The acute weakness can be traced back to a strong private payrolls report and hawkish Fed commentaries. Traders projected the ADP jobs data strength to the Labor Department’s non-farm payrolls data due on Friday. A stronger labor market is the primary reason that has justified Fed’s continued, aggressive rate hikes.

Most stocks moved to the downside on Thursday, with the exception of energy stocks. Real estate, utility and technology stocks were among the worst performers of the session.

U.S. Indices' Performance On Thursday
Index Performance (+/-)   Value
Nasdaq Composite -1.47%   10,305.24
S&P 500 Index -1.16%   3,808.10
Dow Industrials -1.02%   32,930.08

Friday’s jobs report has become important for setting expectations for future rate moves. It wouldn’t be a surprise if the actual number comes well above the expectations of 200,000 new jobs, said Brad McMillan, chief investment officer of Commonwealth Financial Network.

He expects the unemployment rate to remain unchanged at 3.8% or even tick down by a notch and wage growth to remain at recent strong levels.

“If that happens, expect the Fed to keep its rate-raising bias and for the markets to react negatively,” the analyst said.

Here’s a peek into index futures trading:

U.S. Futures' Performance On Friday
Index Performance (+/-)  
Nasdaq 100 Futures -0.08%  
S&P 500 Futures +0.07%  
Dow Futures +0.09%  
R2K Futures +0.18%  

In premarket trading on Friday, the SPDR S&P 500 ETF Trust (NYSE:SPY) was adding 0.09% to $379.73, and the Invesco QQQ Trust (NASDAQ:QQQ) fell 0.07% to $261.40, according to Benzinga Pro data.

On the economic front, the Labor Department will release its NFP report for December at 8:30 a.m. EST. The consensus calls for an addition of 200,000 to payrolls, slower than the 263 job additions in November. The jobless rate is expected to stay put at 3.7% and the average hourly earnings may have increased 5% year-over-year, a downtick from the 5.1% increase in November.

The Institute for Supply Management is scheduled to release its non-manufacturing sector report for December. The non-manufacturing purchasing managers’ index may have declined from 56.5 in November to 55 in December.

Around the same time, the Commerce Department will release its factory orders report for November.

Federal Open Market Committee member and Atlanta Fed President Raphael Bostic is scheduled to speak at 11:15 am EST and 1:30 p.m. EST.

Richmond Fed President Thomas Barkin, also an FOMC member, will make a public appearance at 12:15 p.m. EST.

Stocks In Focus:

  • Tesla Inc. (NASDAQ:TSLA) stock fell over 5.5% in premarket trading in reaction to a price cut the company announced in China.
  • Tesla’s Chinese peers Nio Inc. (NYSE:NIO), XPeng Inc. (NYSE:XPEV) and Li Auto Inc. (NASDAQ:LI) were all moving in sympathy.
  • World Wrestling Entertainment Inc. (NYSE:WWE) rallied over 8% after its former CEO Vince MacMahon said he is planning to assume the role of executive chairman of the company and also called for a strategic review.
  • Costco Wholesale Corp. (NYSE:COST) moved up over 1% after it said its December sales rose 7% and comps increased 5.5%.

Commodities, Other Global Markets:

Crude oil futures climbed close to 1% to $74.39 in the early European session, extending the winning streak to the third straight session.

The yield on the benchmark 10-year U.S. treasury note continued to hover around the 3.7% level. At last check, it was edging up 0.011 percentage points to 3.733%.

The major Asia-Pacific markets closed on a mixed note on Friday, as traders in the region awaited cues from the U.S. December jobs report. South Korea’s Kospi rallied over 1%, while the Indonesian, Australian, Japanese and Chinese markets advanced moderately. On the other hand, Hong Kong’s Hang Seng Index, Singaporean Straits Times Index, India’s Sensex and New Zealand’s NZ50 Index came under selling pressure.

European stocks are moving around nervously after they snapped their three-session winning streak on Thursday. Data showing a cool-off in inflation in the eurozone hasn’t given much fillip to the market.

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