Stocks are edging lower following a mixed May employment report, with investors focused on both growth and inflation prospects for the world’s biggest economy.
Updated at 8:45 am EST
U.S. equity futures moved lower Friday, while the dollar extended gains against its global peers, as investors picked-through a key reading of the domestic job markets amid increasing concerns over the pace of growth in the world’s biggest economy.
With comments from high-level executives such as Jamie Dimon of JPMorgan Chase and Elon Musk of Tesla casting doubt over the near-term strength of the global economy, and payroll processing group ADP indicating a smaller-than-expected level of private job creation last month, today’s more comprehensive non-farm payroll report could provide the market a firm direction for the coming weeks.
U.S. employers added 390,000 new jobs to the economy last month, according to Friday’s May employment report from the Bureau of Labor Statistics, even as hiring begins slows amid growing corporate uncertainty.
“The surge in energy prices and the drop in stock prices can’t be helping here, and it likely will trigger a further slowing in business formations over the next few months,” said Ian Shepherdson of Pantheon Macroeconomics. “But an outright decline in payrolls—a key characteristic of recessions—seems very unlikely to us.”
Underlying inflation pressures continue to trouble investors following a record-high reading in Europe this week as well as a chorus of Federal Reserve governors — including vice chair Lael Brainard — who feel the central bank needs to hold firm on its path of near-term rate hikes in order to bring down the fastest inflation rates in more than forty years.
The expectation of rate hikes, which has given rise to Treasury bond yields, has also boosted the U.S. dollar to its highest levels in two decades, adding a further headwind to earnings generation for some of world’s biggest companies, including Microsoft (MSFT) – Get Microsoft Corporation Report, which cautioned yesterday that its current-quarter profits would fall short of forecasts thanks in part to the surging greenback.
The dollar was modestly firmer this morning, rising 0.25% against a basket of its global peers to 102.24, with benchmark 10-year Treasury note yields rising to 2.971%.
In overseas markets, European stocks added to yesterday’s gain by rising 0.1% in mid-day Frankfurt trading while the region-wide MSCI ex-Japan index gained 0.38% in a follow-on rally from last night’s close on Wall Street.
On Wall Street, futures tied to the Dow Jones Industrial Average indicating a modest 225 point opening bell decline while those linked the S&P 500 were priced for a 40 point move to the downside. Futures linked to the tech-focused Nasdaq are priced for a 195 point opening bell pullback.
A big chunk of the Nasdaq’s decline will be tied to Tesla (TSLA) – Get Tesla Inc Report, which was marked 5.2% lower in pre-market trading following a report that suggested CEO Elon Musk is looking to pare around 10% of the carmaker’s global workforce.
Lululemon Athletica (LULU) – Get Lululemon Athletica Inc Report shares were also active, rising 1.3% after the high-end leisure apparel group posted stronger-than-expected first quarter earnings and boosted its full-year profit forecast.
In the pharma space, Turning Point Therapeutics (TPTX) – Get Turning Point Therapeutics, Inc. Report shares soared after Bristol-Myers (BMY) – Get Bristol-Myers Squibb Company Report agreed to buy the San Diego-based oncology specialists for around $4.1 billion.
Micron Technology (MU) – Get Micron Technology, Inc. Report shares, meanwhile, slumped 3.9% after analysts at Piper Sandler cut their rating on the chipmaker to ‘underweight’ from ‘neutral’, while slashing their price target by $20 to $70 a share, citing economic headwinds for PC and smartphone semiconductor sales.
