LDN - Business

Futures signal further losses on Wall St ahead of jobs data

[December 05, 2023] By Amruta Khandekar and Shristi Achar A

(Reuters) -U.S. stock index futures fell on Tuesday, indicating further losses on Wall Street as investors waited for a slew of data, including the crucial jobs report, to gauge whether the Federal Reserve will cut interest rates by early next year.

After a strong run of gains in November that sent the S&P 500 to its closing high for the year, U.S. equities pulled back in the previous session as longer-dated Treasury yields bounced off three-month lows.

A majority of traders expect the Fed has reached the end of its tightening campaign, given easing inflation, and have nearly fully priced in the likelihood that the central bank will keep rates unchanged next week.

They are also betting on lower interest rates next year, with 61% pricing in a rate cut of at least 25 basis points in March and 87% in May, according to the CME Group's FedWatch tool.

However, market experts have pointed out that investors may have been too optimistic in pricing in early rate cuts and are now awaiting fresh economic data for further policy cues.

"Presently, the markets price in around a 125bp (basis points) cut from the Fed next year," Ipek Ozkardeskaya, senior market analyst at Swissquote Bank, said in a note.

"The Fed optimism looks overstretched, the risk assets were in the overbought territory until yesterday, and we need sufficiently soft U.S. data to keep the bears asleep, otherwise a gust of hot wind could easily rouse the bear from its slumber."

A Labor Department survey due at 10 a.m. ET is expected to show U.S. job openings fell to 9.300 million in October from 9.553 million in September, signaling slowing labor demand. On Friday, the more comprehensive non-farm payrolls report for November will offer greater clarity on the state of the labor market.

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The New York Stock Exchange (NYSE) in New York City, U.S., February 24, 2022. REUTERS/Caitlin Ochs/File Photo

Investors will also parse data on U.S. services sector activity from S&P Global and the Institute for Supply Management on Tuesday.

Megacap stocks extended declines from the previous session, with Nvidia, Amazon.com and Tesla down between 0.9% and 1% before the bell.

At 7:00 a.m. ET, Dow e-minis were down 115 points, or 0.32%, S&P 500 e-minis were down 20 points, or 0.44%, and Nasdaq 100 e-minis were down 103 points, or 0.65%.

Among other stocks, Take-Two Interactive Software fell 4.8% premarket after a trailer of the latest installment of its best-selling "Grand Theft Auto" videogame franchise was released.

CVS Health added 2.5% on forecasting 2024 revenue above Wall Street estimates, as the insurer expects to benefit from its expansion into health services.

Shares of U.S.-listed Chinese firms including PDD Holdings, JD.com and Baidu fell between 1.8% and 2.2% after ratings agency Moody's cut its outlook on China's government credit ratings to "negative" from "stable".

(Reporting by Amruta Khandekar and Shristi Achar A; Editing by Pooja Desai)

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