U.S. stock index futures were mostly edging lower Friday morning, ahead of the nonfarm payrolls report for May which could serve as the biggest driver of stock price moves this week after a period of sideways trading.
The Labor Department’s report on employment for May is due at 8:30 a.m. Eastern Time.
- Futures for the Dow Jones Industrial Average were trading 43 points, or 0.1%, lower at 34,524.
- S&P 500 index futures was off 1.05 points to 4,190.25, a decline of less than 0.1%.
- Nasdaq-100 futures were up 1.50 points, or less than 0.1%, to reach 13,530.75.
On Thursday, the Dow closed down 23.34 points, or 0.1%, at 34,577.04, snapping a five-day win streak. The S&P 500 stumbled 15.27 points, or 0.4%, to 4,192.85, while the Nasdaq Composite Index declined 141.82 points, or 1%, to 13,614.51.
What’s driving the market?
May’s employment report from the U.S. Labor Department is viewed by many economists and traders as significant because it comes after April data showed that just 266,000 new jobs were created on a seasonally adjusted basis, significantly missing economists’ forecast that had come in on average at around 1 million.
Last month’s weaker-than-expected payrolls increase forced economists to revisit their predictions, leading Aneta Markowska, chief economist with Jefferies Financial Group, to say that she was uneasy with her own forecast after her bold 2.1 million forecast for April badly missed, as did most other estimates.
“This is probably the least conviction I’ve had on a payrolls forecast in my entire career,” she acknowledged. Jefferies’ best guess for May jobs this time around is 450,000.
The Wall Street consensus estimate for May has crept up to 671,000, based on a poll of economists by Dow Jones and The Wall Street Journal. The unemployment rate, meanwhile, is expected to dip to 5.9% from 6.1%. The official rate probably understates the true level of joblessness by 2 to 3 percentage points, economists say, but it is falling steadily.
The nonfarm payrolls data come a day after a reading of private sector employment from Automatic Data Processing, reported a 978,000 increase in jobs created in May, adding to an upbeat tone. However, the ADP reports haven’t always aligned with the more closely watched government report.
On Thursday, U.S. stock indexes ended down and the Dow halted a five-session win streak after upbeat economic data helped push up U.S. Treasury yields which in turn weighed on technology and other growth-oriented stocks that are more sensitive to rising interest rates.
The Institute for Supply Management said its services survey rose to a record 64% in May from 62.7% in April, and weekly data on applications for unemployment benefits showed that first-time claims fell to 385,000 last week, the first reading below 400,000 since the pandemic began.
“This means that stock market bulls should be wary of solid labour market data later today,” wrote Alex Kuptsikevich, senior market analyst at FxPro, in a daily research note.
“Strong employment growth will unleash the Fed’s inflationary spiral, which will be a blow to equities and risk crashing commodity markets as well as putting the dollar back on the upside. At the same time, weak indicators will create hopes of extending the status quo in Fed policy, which will be suitable for markets and return moderate pressure on the dollar,” the analyst wrote.
Investors were also keeping one eye on discussions around an infrastructure spending proposal, after President Biden signaled that his administration would be willing to make concessions on corporate taxes to forge a deal.
Which companies are in focus?
- Bill Ackman’s special-purpose acquisition company, Pershing Square Tontine Holdings, PSTH is nearing a transaction with Universal Music Group that would value the world’s largest music business at about $40 billion.
- Meme stock AMC Entertainment Holdings Inc. AMC revealed Thursday afternoon that it will ask shareholders for the authority to issue up to 25 million shares, after selling stock into a dramatic upswell of its share price in recent days.