LDN - Business

Futures subdued as rate-cut bets face payrolls' test

[December 08, 2023] By Amruta Khandekar and Shristi Achar A

(Reuters) -U.S. stock index futures edged lower on Friday as investors geared up for the crucial monthly payrolls report for more insight into the labor market, which could dictate the Federal Reserve's stance on monetary policy for the upcoming year.

The Labor Department's closely watched report, due at 8:30 a.m. ET, is expected to show U.S. job growth likely picked up steam in November as workers in sectors ranging from automobiles to casinos returned after their hard-fought strikes.

Nonfarm payrolls likely increased by 180,000 jobs last month after rising 150,000 in October, according to a Reuters poll of economists. The unemployment rate is forecast to remain unchanged at nearly a two-year high of 3.9%.

A slew of data this week has indicated a softening labor market, fuelling bets that the Fed was at the end of its tightening campaign and could pivot to lower rates soon.

Some analysts have warned that a stronger-than-expected reading could pour cold water on such hopes.

"The fact that the data released earlier this week hinted at a clear loosening in the U.S. jobs market makes many investors think that today's official data will also follow the loosening trend," Ipek Ozkardeskaya, senior market analyst at Swissquote Bank, wrote in a note.

"If the data is soft enough, the rally in U.S. bonds could continue ... while a stronger-than-expected figure could help scale back dovish (Fed) expectations."

Optimism around peaking interest rates and upbeat quarterly earnings have led to a strong rebound in equities towards the end of the year, while the 10-year Treasury yield has plunged from its October peak of about 5%.

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A street sign for Wall Street hangs in front of the New York Stock Exchange May 8, 2013. REUTERS/Lucas Jackson/File Photo

The S&P 500 has risen 19% so far in 2023 and is within the spitting distance of its highest intraday level of the year hit in July.

The Fed is due next week to hold a monetary policy meeting, where it is widely expected to keep rates unchanged. Bets that the central bank will deliver a rate cut of at least 25 basis points in March currently stand at 58.5%, according to the CME Group's FedWatch tool.

At 7:04 a.m. ET, Dow e-minis were down 44 points, or 0.12%, S&P 500 e-minis were down 7.25 points, or 0.16%, and Nasdaq 100 e-minis were down 54 points, or 0.34%.

Among major movers, Qualcomm slipped 1.1% in trading before the bell as Morgan Stanley downgraded the chip firm to "equal weight" from "overweight."

Lululemon Athletica fell 2.4% after the premium apparel retailer forecast fourth-quarter results below expectations.

Investors will also watch out for the University of Michigan's preliminary consumer sentiment data for December later in the day.

(Reporting by Amruta Khandekar and Shristi Achar A; Editing by Anil D'Silva)

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