Wall Street is in wait-and-see mode ahead of Friday’s crucial August jobs report.
U.S. equity futures nudged higher Friday, while the dollar held onto gains against its global peers, as investors braced for a crucial August jobs report amid accelerating bets on another jumbo rate hike from the Federal Reserve.
With the dollar trading touching a fresh 20-year high against a basket of six global currencies this week, and benchmark 2-year Treasury note yields rising past 3.5% for the first time since 2007, investors appear to be heeding the Fed’s warnings on inflation, as well as its commitment to lift its benchmark Fed Funds rate close to, or possibly above, 4% by the end of the year.
The CME Group’s FedWatch pegs the chances of a 75% basis point rate hike on September 21, the third in a row, at around 70%, up from just 41% at the beginning of August.
The moves have taken the steam out of a summertime rally for stocks, which began in early June amid bets that the Fed would possibly pause its rate-hike path in the face of slowing domestic growth and data showing easing inflation pressures.
Stocks Flat, Jobs Data, Starbucks, Lululemon And Broadcom In Focus – Five Things To Know
Since then, however, the job market has continued to improve and the Atlanta Fed’s GDPNow forecasting tool indicates third quarter growth is advancing at a 2.6% clip.
Still, investors are pulling cash out of stocks, with $9.4 billion in outflows this week, according to Bank of America data, the fourth largest exit of the year.
That puts a great deal of emphasis on today’s August payroll report, particularly with respect to wages, as investors seek to define the Fed’s ambitions between now and the end of the year.
The pace of overall jobs growth is likely to ease from July’s torrid 528,000, analysts estimate, with Street forecasts hovering between 285,000 and 300,000 for the headline tally, a gain that would mark 20 consecutive months of hiring growth.
However, with the July JOLTs report showing big upticks in unfilled positions, which hit 11.2 million last month, and weekly applications for new jobless benefits falling, investors are concerned that average hourly earnings will need to rise sharply in order to tempt Americans back into the workforce.
Economists are looking for average hourly earnings to rise 0.4% on the month, and 5.3% on the year, with any faster-than-expected reading likely to add to bets on a third consecutive 75 basis point rate hike from the Fed later this month in Washington.
On Wall Street, futures contracts tied to the S&P 500 are indicating a 2 point opening bell gain while those linked to the Dow Jones Industrial Average are priced for a 12 point bump. Futures linked to the tech-focused Nasdaq are indicating a 7 point dip
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Stocks on the move include Lululemon Athletica (LULU) – Get lululemon athletica inc. Report, which surged 9.75% after the casual and sports apparel group posted stronger-than-expected second quarter earnings and boosted its full-year profit forecast.
Broadcom (AVGO) – Get Broadcom Inc. Report was also higher, rising 2.2%, after after the chipmaker’s stronger-than-expected third quarter earnings and robust near-term outlook.
Starbucks (SBUX) – Get Starbucks Corporation Report, meanwhile, edged 0.1% higher after it named Laxman Narasimhan, the former head of brands giant Reckitt, as CEO of the world’s biggest coffee chain.
In overseas markets, new China lockdowns — including in the tech hub of Shenzen — and threats of foreign exchange intervention from Japan as the yen slumps to a 24-year low against the dollar pinned down gains for stocks in the region, with the MSCI ex-Japan benchmark falling 0.56% into the close of trading.
In Europe, stocks were 0.5% higher in early Frankfurt trading, paced by gains in the banking sector amid reports that Credit Suisse is planning to cut around 5,000 jobs from its global headcount and the Fed ending its decade-long oversight of HSBC following its record $1.92 billion money laundering fine from 2012.
