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U.S. equity futures edged high Friday, while Treasury yields and the dollar held steady, as investors braced for a key May employment report that could cement the market’s growing case for a September Federal Reserve rate cut.
Stocks finished modestly lower Thursday, after touching intra-day highs earlier in the session, as a pullback in some megacap tech names such as Nvidia (NVDA) and Apple (AAPL) offset the ongoing really in Treasury bonds.
Friday’s session, however, will be dominated by reaction to the Labor Department’s May employment report, which is expected to show the economy added 185,000 new jobs last month while the headline unemployment rate held steady at 3.9%.
Related: Jobs report to highlight shift from hot inflation to cooling labor market
With a slew of job market data this week signaling weak momentum heading int to the summer months, a softer-than-expected reading could add to bets that the Fed will be the first of two rate cuts in September.
An upside surprise, meanwhile, could add to concerns that inflation pressures are likely to remain elevated, and that the economy is resilient enough to withstand the Fed’s “higher for longer” rate messaging.
The Labor Department is likely to report that 185,000 new jobs were created last month, while the headline unemployment rate held at 3.9%
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“It’s important to note that while we might observe a higher number this month, the broader trend shows a stabilization, if not a slight decline, in the growth rate of new hires,” said Ken Tjonasam, portfolio strategist at Global X.
“The recent JOLT and ADP reports have been encouraging, pointing towards a normalization in the labor market, which will certainly catch the Fed’s attention and the market may continue to reprice for a ‘1 or none’ Fed cut scenario,” he added.
Benchmark 2-year note yields were marked at 4.740% in early New York trading, while 10-year notes held below the 4.30% mark at 4.299%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, slipped 0.01% to 104.089.
The CME Group’s FedWatch, meanwhile, pegs the odds of a September rate cut at around 68%, while pricing in little chance of a move at either next week’s policy meeting or the July gathering in Washington.
On Wall Street, equity futures suggest a muted open ahead of the jobs data at 8:30 am Eastern time, with futures tied to the S&P 500 indicating a 1 point advance and the Dow Jones Industrial Average called 20 points lower.
The Nasdaq, meanwhile, is priced for a 10 point opening bell gain.
GameStop (GME) shares were back on the move in premarket trading, following on from yesterday’s 47.5% surge, as the market’s leading meme stock added another 22.2% even as the retailer posted first quarter earnings showing a $32 million loss and a year-on-year sales decline of 28%.
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In overseas markets, Europe’s Stoxx 600 slipped 0.33% in Frankfurt following yesterday’s 25 basis point rate cut from the European Central Bank, the first since 2019, while Britain’s FTSE 100 fell 0.52% lower in London.
Overnight in Asia, the Nikkei 225 ended the week 0.05% lower amid tepid trading ahead of today’s May jobs report, while the region-wide MSCI ex-Japan index rose 0.39% into the close of trading.
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