Wall Street is focused on the release of November jobs data following a dovish turn earlier this week from Fed Chairman Jerome Powell.
U.S. equity nudged lower Friday, while the dollar extended declines against its global peers and Treasury yields dipped, as investors braced for a key November jobs report that caps a busy week for economic data releases in the world’s biggest economy.
Softening inflation, weakening manufacturing activity and muted private sector hiring were all in evidence this week as investor sifted through a series of readings on the health of the U.S. economy and the impact of Federal Reserve rate hikes on underlying demand.
Fed Chairman Jerome Powell’s suggesting that smaller rate hikes are likely to form the basis of the central bank’s inflation fight going forward provided some decent risk sentiment, but questions over the fate of China’s Covid policy, the ongoing Russian invasion of Ukraine and the odds of a near-term recession continue to test the market’s bullish thesis.
That said, the S&P 500 has risen nearly 14% from its mid-October lows, a move that has effectively halved the benchmark’s year-to-date decline, as investors bet that the Fed will be able to engineer a so-called soft landing for the U.S. economy.
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Today’s November jobs report, expected at 8:30 am Eastern time, will provide a stern test to that theory, with investors looking for solid gains in new hires paired with muted wage increases.
The U.S. economy likely added another 200,000 new hires last month, the Labor Department will report Friday, as hiring cools into the final months of the year but remains solid enough to tempt post-Covid job seekers back into the labor market.
Analysts are looking for a headline jobs gain of 200,000, down from the 261,000 recorded over the month of October, with unemployment holding steady at 3.7%. Average hourly earnings are expected to ease for a fourth consecutive month, to an annual rate of 4.6% from 4.7%, a level that would likely provide little concern that wage growth will stoke inflation pressures over the coming months.
Bonds are poised for just such an outcome, with benchmark 10-year Treasury note yields easing to 3.524% in overnight trading, while the dollar index fell another 0.24% against its global peers to change hands at 104.467 in overnight trading.
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 are indicating a modest 2 point decline while those linked to the Dow Jones Industrial Average are priced for a 20 point dip. The tech-focused Nasdaq is looking at a 10 point pullback.
Overnight in Asia, stocks ended the week modestly lower amid renewed speculation that China is reading to alter some of its stricter Covid rules, a move that could pave the way for a broader re-opening of the world’s second largest economy later next year.
The region-wide MSCI ex-Japan index was marked 0.57% lower heading into the close of trading while Europe’s Stoxx 600 slipped 0.24% to start the session in Frankfurt, but the benchmark is still on pace for its seventh consecutive weekly gain.
