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Futures subdued ahead of December jobs report

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2023-01-06T11:35:58Z

Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 5, 2023. REUTERS/Andrew Kelly

U.S. stock index futures were muted on Friday with all eyes on the jobs data due later in the day for further clues on how aggressive the Federal Reserve will be with its monetary policy tightening.

The Labor Department’s more comprehensive jobs report due at 8:30 a.m. ET is expected to show nonfarm payrolls rose by 200,000 in December, less than the increase in November, while the unemployment rate was likely to remain unchanged at 3.7% in the last month.

Labor market resilience has underpinned the economy by sustaining consumer spending, but could prompt the Fed to lift its target interest rate above the 5.1% peak it had projected last month and keep it there for a while.

“The attention today will be less on the headline numbers, but on how many services jobs are added, as well as the pace of any wage gains as some FOMC members fret about the prospect of a wage price spiral,” Michael Hewson, chief market analyst at CMC Markets UK, said.

The numbers come a day after the ADP National Employment report showed a higher-than-expected rise in private employment in December, while another report showed weekly jobless claims dropped to a three-month low.

Wall Street’s main indexes lost more than 1% in the previous session as evidence of a tight labor market eroded hopes that the Fed could pause its rate hiking cycle anytime soon as it remains focused on inflation.

Following the data on Thursday, the odds tilted towards a split verdict on rate hikes, with money market participants now seeing a 54.3% chance of a 25-basis point rate hike in February and a terminal rate of just above 5% by June.

Investors will also focus on comments from a slew of Fed officials scheduled to speak later on Friday.

Factory orders for November and ISM non-manufacturing data for December, due after the opening bell, will also be closely monitored.

U.S. equities were on track to log losses in the first trading week of 2023, with the benchmark S&P 500 (.SPX) losing 0.8%, while the Nasdaq Composite (.IXIC) was down 1.5% as of Thursday’s close.

Also weighing on the markets were minutes from the Fed’s December meeting that showed the central bank was laser-focused on fighting inflation even as officials agreed to slow the pace of rate hikes to limit risks to economic growth.

At 5:47 a.m. ET, Dow e-minis were up 29 points, or 0.09%, S&P 500 e-minis were up 2.25 points, or 0.06%, and Nasdaq 100 e-minis were down 12.25 points, or 0.11%.

Tesla Inc (TSLA.O) dropped 4.7% in premarket trading after the company cut electric-car prices in China for the second time in less than three months.

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