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U.S. equity futures moved lower in early Friday trading, while Treasury yields and the dollar continued to inch upwards, as investors tracked the ongoing selloff in global government bond markets heading into a key December jobs report prior to the start of trading.
Stocks have struggled to find upward momentum this week, and even with a modestly higher close on Wednesday, the S&P 500 is clinging to a January gain of just 0.25% heading into today’s key labor market update and the start of the fourth quarter earnings season next week.
Much of the pullback seen in U.S. stocks, and indeed markets elsewhere, is tied to the selloff in global government bonds, which has taken U.K. gilt yields to the highest levels in more than a decade and benchmark 10-year Treasury note yields to levels since in April of last year.
Renewed inflation risks, massive government deficits and legacy debt levels, alongside concern that President-elect Donald Trump’s economic agenda will add to all three, have been closely-linked to the rise in Treasury yields and the corresponding impact to U.S. stocks.
Fed Chair Jerome Powell
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Benchmark 10-year Treasury notes were last marked at 4.694% heading into the start of the New York trading session, while 2-year notes were rose to 4.354% ahead of today’s payroll report at 8:30 am Eastern time.
Economists expect to see that employers added 165,000 new jobs last month, a solid overall tally but slower than the 227,000 pace recorded over the month of November. The headline unemployment rate is likely to remain steady at 4.2% while hourly wage gains are forecast to moderate to around 0.3%.
Related: Skyrocketing bond yields deliver a big blow to stocks
Anything hotter than the Street’s consensus forecast, particularly on the wage front, is likely to stoke yields higher and pull stocks deeper into the red over the final trading day of the week.
As it stands, futures contracts tied to the S&P 500 are priced for a 12 point opening while those linked to the Dow Jones Industrial Average are indicating a 40 point opening bell decline.
The tech-focused Nasdaq, which is down 0.05% for the month, is priced for a modest 60 point decline, with Nvidia (NVDA) , Tesla (TSLA) and Advanced Micro Devices (AMD) pulling the index lower with premarket declines.
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In overseas markets, Europe’s Stoxx 600 index was marked 0.14% lower in Frankfurt, with benchmark 10-year German government bond yields rising to the highest levels since July.
In Britain, the FTSE 100 slipped 0.21% as the pound fell to a 14-month low of 1.2286 against the U.S. dollar and 10-year gilt yields eased to 4.845%, near the 2008 highs seen earlier this week.
Overnight in Asia, the region-wide MSCI ex-Japan benchmark fell 0.81% into the close of trading, thanks in part to another downward slump for stocks in China, while the Nikkei 225 closed 0.14% lower in Tokyo.
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