Futures edge higher ahead of key payrolls data

[July 05, 2024]  (Reuters) - U.S. stock index futures inched up at the end of a week that saw signs of a softening economy raising hopes of an interest rate cut in September, with investors gearing up for yet another key employment report after returning from a July 4th holiday.

A Labor Department report, due at 8:30 a.m. ET, is expected to show non-farm payrolls rose by 190,000 in June after advancing by 272,000 jobs in May, while unemployment rate likely remained unchanged at 4% and average hourly earnings rose 0.3% after rising 0.4% the previous month.

"The NFP number has come in above forecasts in eight cases out of the last 10 ... makes it harder for the Fed to justify rate cuts, as a tight labor market can easily increase inflationary pressures," noted David Morrison, senior market analyst at Trade Nation.

The ADP Employment report and weekly jobless claims earlier this week signaled easing labor market conditions, while a measure of services sector activity dropped to a four-year low and factory orders slumped unexpectedly.

"Disappointing ISM Services PMI is another indication that the economy is slowing down. Yet again, the Fed has to balance the risk of cutting too soon, before inflation is properly beaten, or leaving it too late and risking a recession," Morrison added.

Taking cues from the data points, market participants strengthened their bets for this year's rate cuts.

Chances of a 25-basis-point cut in September had risen to 68% from last week's 58%, as per CME Group's FedWatch Tool.

At 5:11 a.m. ET, Dow e-minis were up 25 points, or 0.06%, S&P 500 e-minis were up 2.25 points, or 0.04%, and Nasdaq 100 e-minis were up 21 points, or 0.1%.

The S&P 500 and the Nasdaq notched record closing highs in Wednesday's holiday-shortened trading. With the equity market also staying shut for U.S. Independence Day on Thursday, trading volumes have been light throughout the week.

A trader works on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., July 3, 2024. REUTERS/Brendan McDermid

All the three major Wall Street indexes are poised for weekly gains, after high-momentum top technology stocks steered the S&P 500 and the Nasdaq to strong gains in the first half of the year.

Remarks by New York Fed President John Williams, during the day, will also be monitored after the Fed's June policy meeting minutes showed officials acknowledged a slowing economy and diminishing price pressures, yet counseling a wait-and-see approach before committing to rate cuts.

Among early premarket movers, Tesla rose 1.7% after hitting its highest level since early January on Wednesday.

Macy's climbed 2% after a media report said Arkhouse Management and Brigade Capital Management raised their bid to buy the department store chain for about $6.9 billion.

Cryptocurrency-related stocks including Coinbase Global, Riot Platforms and Marathon Digital lost 7%-8% after bitcoin slumped to an over four-month low as traders fretted over the likely dumping of tokens from defunct Japanese exchange Mt. Gox and further selling by leveraged players.

(Reporting by Ankika Biswas in Bengaluru; Editing by Saumyadeb Chakrabarty)

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