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U.S. equity futures were mixed in early Thursday trading, while Treasury yields and the dollar extended their recent run of declines, as investors looked to a key series of labor market data releases that are likely to define the Federal Reserve’s autumn rate path.
Updated at 6:25 AM EDT
Verizon adds fiber
Verizon Communications (VZ) revealed plans for a $20 billion takeover of Frontier Communications (FYBR) in an all-cash deal that would rapidly-expand the carrier’s fiber optic network.
Verizon said it will pay $38.50 per share for Frontier, a 37% premium to the stock’s price prior to report of a potential takeover in early September.
Verizon shares were marked 0.75% higher in premarket trading at $41.79 each while Frontier slumped 9.5% to $35.00 each.
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Stocks ended mixed Wednesday, with a pullback in tech stocks keeping the Nasdaq in negative territory for the quarter and a modest nudge higher in defensive stocks helping the Dow Jones Industrial Average eek out a meagre 38 point gain.
Big moves in the bond market, however, suggest traders are cementing their bets on autumn Fed rate cuts, particularly after a weaker-than-expected reading for July job openings, which fell to the lowest levels since January of 2021.
The CME Group’s FedWatch is pegging the odds of an outsized 50 basis points rate cut later this month in Washington at around 45%, and is pricing in at least a full percentage points of easing between now and the end of the year.
Late Wednesday comments from San Francisco Fed President Mary Daly also solidified the case for policy easing as she told Reuters that keeping rates too high for too long could lead to “additional slowing in the labor market, and to my mind, that would be unwelcome.”
A quartet of job market data over the next two sessions could define both the Fed’s rate path and stock market direction into the autumn months.
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Wall Street’s focus is very likely to be focused on that very weakness today with layoff updates from Challenger Gray, ADP’s national employment report and weekly jobless claims data from the Labor Department, all of which are set to arrive prior to the opening bell.
Related: Fed rate cuts may not guarantee a September stock market rally
Stock futures were mixed heading into the data releases, with the S&P 500 called 3 point lower and the Dow priced for a 10 point advance. The tech-focused Nasdaq is called 34 points lower.
In the bond market, the yield differential between 2-year and 10-year notes was essentially flat for only the second time in more than two years, with both trading at 3.768% heading into the New York session.
A normalizing of the so-called yield curve suggests investors are betting on a series of Fed rate cuts, which push 2-year yields lower, while also buying longer-date bonds as a defensive tactic against slowing economic growth.
The US (2s-10s) yield curve is on the verge of dis-inverting.#economy #markets pic.twitter.com/qtYHIVCCUt
— Mohamed A. El-Erian (@elerianm) September 4, 2024
In other markets, global oil prices booked modest gains following a report that the OPEC producers cartel is planning to delay increases to its collective output after crude hit a 14-month low on demand concerns earlier this week.
WTI crude futures for October delivery, the U.S. benchmark which is tightly-linked to gasoline prices, was last seen trading 68 cents higher on the session but still firmly below $70 at $69.88 per barrel.
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In Europe, the regional Stoxx 600 benchmark edged 0.1% lower in early Frankfurt trading as markets eyed the spate of U.S. jobs data, while Britain’s FTSE 100 rose 0.08%.
Overnight in Asia, the Nikkei 225 fell another 1.05% in Tokyo as the yen rose to a one-month high against the U.S. dollar and held down gains for export stocks. The region-wide MSCI ex-Japan benchmark, meanwhile, was marked 0.33% higher heading into the close of trading.
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