Futures muted after jobs data raises odds of more rate hikes
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[April 10, 2023] By
Sruthi Shankar and Ankika Biswas
(Reuters) - U.S. stock index futures were subdued on Monday on growing
risks that the Federal Reserve will continue to hike interest rates
after Friday's jobs data highlighted a still-strong labor market.
Nasdaq 100 futures were down slightly, with growth stocks including
Apple Inc, Amazon.com Inc and Microsoft Corp slipping in premarket
trade.
U.S. employers maintained a strong pace of hiring in March, data on
Friday showed, pushing the unemployment rate down to 3.5% and raising
odds of the Fed hiking rates one more time next month.
While non-farm payrolls increased by 236,000 jobs last month, slightly
weaker than economists' expectations, investors focused on the overall
data which signaled labor market resilience.
"We see a disconnect between markets presuming much easier Fed policy on
'softer' data and how the Fed will actually see the data," Citi
economists said.
"Not only should high inflation and a still-strong labor market keep
cuts unlikely, but we see persistently too-strong inflation, including a
0.5% MoM increase in core CPI this week, as leading to further hikes."
A string of reports last week, including weak private payrolls and job
openings data, pointed to slowing labor demand and raised hopes of the
Fed pausing its market-punishing rate hikes amid the recent banking
sector turmoil.
Traders' bets of a 25-basis point rate hike by the Fed in May have risen
to over 65%, according to CME Group's Fedwatch tool, up from 57% last
week.
While U.S. stock markets were closed for Good Friday, Treasury yields
surged after the data, with the two-year yield, which typically moves in
step with rate expectations, jumping to 3.99% on Friday. It was last
down at 3.94%. [US/]
The focus this week will shift to U.S. consumer and producer prices
data, minutes from the Fed's March meeting and quarterly results from
big U.S. banks including JPMorgan Chase & Co, Citigroup Inc and Wells
Fargo & Co.
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Traders work on the trading floor at the
New York Stock Exchange (NYSE) in New York City, U.S., March 31,
2023. REUTERS/Andrew Kelly
Analysts expect S&P 500 companies' profits to shrink 5.2% in the
first quarter, as per Refinitiv IBES estimates, a reversal from the
1.4% growth forecast at the start of the year.
At 6:48 a.m. ET, Dow e-minis were up 29 points, or 0.09%, S&P 500
e-minis were up 1.25 points, or 0.03%, and Nasdaq 100 e-minis were
down 17.25 points, or 0.13%.
First Republic Bank's shares fell 2% as the lender said on Friday it
plans to suspend payments of quarterly cash dividends on its
preferred stock "as a measure of prudent oversight".
Shares of regional banks were mixed after Fed data on Friday showed
deposits at U.S. commercial banks rose near the end of March for the
first time in about a month, showing signs of stabilizing after the
recent bank failures rocked the banking system and rattled
depositors.
Western Alliance Bancorp and PacWest Bancorp were down 1.2% and
0.5%, respectively, while Comerica Inc rose 0.9%.
Pioneer Natural Resources Co jumped 7.4% following a report that
Exxon Mobil Corp held preliminary talks with the company about a
possible acquisition of the shale oil producer.
Semiconductor stocks such as Micron Technology Inc and Western
Digital Corp gained 6.6% and 5.3%, respectively, following Samsung
Electronics Co Ltd's plans to cut chip production.
(Reporting by Sruthi Shankar and Ankika Biswas in Bengaluru;
Additional reporting by Medha Singh; Editing by Varun H K and
Shounak Dasgupta)
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