Futures signal downbeat first week of 2024, jobs data in focus

[January 05, 2024]  By Johann M Cherian and Shristi Achar A

(Reuters) -U.S. stock index futures slipped on Friday and signaled losses for the first week of 2024, ahead of a key jobs report that could test expectations for an early start to the Federal Reserve's easing cycle.

The benchmark S&P 500 was on track for its worst week since late October as investors cashed in after a nine-week winning streak driven by bets that aggressive rate cuts were on the horizon.

The Nasdaq was on course for its worst weekly performance since late September, impacted by rotation out of tech-heavy stocks into defensive sectors like healthcare, financials and utilities.

After the recent Fed meeting minutes failed to offer hints on the timeline for monetary easing, traders dialed back rate-cut expectations and now see a 63.8% chance for at least a 25 basis points (bps) cut in March, down from nearly 86% a week ago, according to the CME FedWatch Tool.

Yields on U.S. Treasury notes, an indicator of interest rate expectations, ticked higher with the yield on the benchmark 10-year note rising over 4% to a three-week high. [US/]

All eyes were on the official non-farm payrolls report, due at 8:30 a.m. ET, for clues on how long the Fed could keep credit conditions restrictive.

U.S. job growth likely moderated in December, while the increase in annual wages probably slowed to below 4% for the first time in 2-1/2 years, according to a Reuters survey of economists.

"Demand for labor is moderating, which top policymakers have indicated will be crucial for hitting its 2% inflation target on a sustained basis," analysts at UBS wrote.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., December 4, 2023. REUTERS/Brendan McDermid/File Photo

"The consensus forecast is for a modest rise in the unemployment rate and a slowing of the growth in average earnings."

At 6:56 a.m. ET, Dow e-minis were down 98 points, or 0.26%, S&P 500 e-minis were down 13.5 points, or 0.29%, and Nasdaq 100 e-minis were down 59.25 points, or 0.36%.

Among early movers, Tesla shed 0.8% before the bell. The electric-vehicle maker is conducting an effective recall on 1.62 million vehicles in China, the market regulator said.

Other megacap names including Microsoft, Apple and Alphabet lost between 0.1% and 0.7%.

Chipmakers like Micron Technology, Intel and Qualcomm declined between 1.1% and 1.4%.

Applied Therapeutics tumbled 26.6% after the drug developer's heart disease drug showed disappointing results in a late-stage trial.

Palantir Technologies lost 3.9% after Jefferies downgraded the data analytics firm to "underperform" due to high stock valuations.

Later in the day, investors will parse remarks by Richmond Fed President Thomas Barkin, a voting member this year.

(Reporting by Johann M Cherian and Shristi Achar A in Bengaluru; Editing by Devika Syamnath)

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