Wall Street futures slip ahead of jobs data

[July 07, 2023]  (Reuters) - U.S. stock index futures slipped on Friday, as investors remained on edge ahead of a jobs report after recent data that signaled economic resilience reinforced expectations of higher rates for a longer period and pushed yields to multi-year highs.

The Labor Department's closely watched employment report due at 08:30 a.m. ET could lead the Federal Reserve to resume raising interest rates this month, after a pause in June, as signaled by the U.S. central bank and Chair Jerome Powell.

According to a Reuters survey, non-farm payrolls likely rose by 225,000 jobs last month after surging by 339,000 jobs in May.

Investors are worried about further hikes if the latest data indicates the labor market has remained resilient, as shown on Thursday by the surge in June's private payrolls numbers, despite the Fed delivering 500 basis points worth of rate hikes this cycle.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, hovered near 5% on Friday after hitting its highest level since June 2007 in the previous session, as traders bumped up the probability of another Fed rate hike in November.

Most tech and growth megacaps, valuations in which come under pressure when borrowing costs rise, edged down in premarket trading, with Meta Platforms and Nvidia down 0.4% and 0.3%, respectively.

"One thing is for certain: given yesterday's moves, a mild upside surprise is already in the price," said Julien Lafargue, chief market strategist at Barclays Private Bank.

"Should the NFP send a similar message as the ADP figure, the market will gain confidence that the well-anticipated recession is being pushed back and that the Fed may need to be more aggressive."

Wall Street's main indexes ended sharply lower on Thursday in a broad selloff, with the benchmark S&P 500 posting its biggest daily percentage drop in six weeks.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., July 6, 2023. REUTERS/Brendan McDermid

At 05:22 a.m. ET, Dow e-minis were down 12 points, or 0.04%, S&P 500 e-minis were down 2.25 points, or 0.05%, and Nasdaq 100 e-minis were down 16.75 points, or 0.11%.

All three major U.S. stock indexes were on track to end the week lower as investors braced for interest rates to head higher still and escalating tensions between Beijing and Washington added to concerns.

U.S. Treasury Secretary Janet Yellen kicked off a four-day visit to Beijing by calling for market reforms in China.

Among other early movers, Tesla shed 0.7% after it said it would offer new buyers of its top-selling electric vehicles in China a cash bonus equivalent to almost $500 if they have a referral from an existing owner.

Levi Strauss & Co tumbled 8.2% as the denim clothing maker cut its annual profit forecast on Thursday.

U.S.-listed shares of Alibaba gained 2.6% after sources said Chinese authorities are likely to impose a fine on Ant Group, bringing an end to the affiliate fintech company's years-long regulatory overhaul.

Also in focus, JPMorgan Chase, Citigroup and Wells Fargo kick off second-quarter earnings season next week, after the biggest crisis since 2008 earlier this year pummeled the banking sector.

(Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Shinjini Ganguli)

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