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The Friday Market Minute

  • Global stocks edge lower ahead of today’s May non-farm payroll report as inflation signals accelerate and pressure on the Fed’s ‘transitory’ narrative continues to build.
  • U.S. employers likely added a net new 650,000 jobs to the economy last month, analysts estimate, with wages rising 0.2% and the headline unemployment rate falling to 5.9%
  • Benchmark 10-year note yields rise to 1.63% while the dollar index gains 0.1% to trade at 90.565 ahead of today’s non-farm payroll data.
  • CDC data shows 136.6 million Americans have now been fully vaccinated against the coronavirus, with around 297.7 million doses administered as of Wednesday.
  • U.S. equity futures suggest a weaker open head of the May non-farm payroll report at 8:30 am Eastern time and a speech on the central bank’s role in green investment from Fed Chair Jerome Powell at 7:00 am Eastern time.

Wall Street futures edged lower in early trading Friday as investors braced for a crucial May jobs report that could indicate a surge in new hiring and a change in the Federal Reserve’s view on inflation and interest rates. 

The U.S. economy likely added 650,000 new jobs last month, according to analysts’ forecasts for today’s non-farm payroll report, more than double the disappointing 266,000 tally in April, as vaccinations accelerated and more states moved to limit unemployment benefits. 

Data from payroll processing group ADP showed private employers added a much larger-than-expected 978,000 new jobs last month while new claims for unemployment benefits fell to a new post-pandemic low of 385,000 for the week ending May 22.

Investors will also be closely tracking the data for any increase in hourly wages amid concern that the record 8.1 million job openings has compelled employers to pay increasingly higher salaries to fill vacant positions. 

That dynamic, as well as a series of data releases from both the manufacturing and services sector of the economy showing input costs rising at the fastest pace in decades, has investors worried that headline inflation, currently running at 4.2%, will accelerate further into the summer months. 

The direction of oil prices certainly adds to that theory, with WTI crude rising more than 4% this week to a 2018 high of $69.20 per barrel in overnight trading — taking its year-to-date gain past 30% — as traders see deeper demand from major economies around the world over the second half of the year.

Still, even with a plethora of figures cementing the case for near-term inflation spikes, benchmark 10-year Treasury bond yields — a key metric for stock market direction — have held near the 1.6% mark for much of the week. 

Friday’s early moves, however, suggest a bit more nervousness: yields rose 4 basis points overnight to 1.63% heading into today’s payroll reading, with the dollar index climbing to a multi-week high of 90.564 against its global currency peers.

That’s pulled U.S. equity futures lower ahead of the 8:30 am Eastern time release, with contracts tied to the Dow Jones Industrial Average indicating a 40 point pullback, the S&P 500 priced for a 3 point dip and the Nasdaq looking at a modest 10 point retreat.

Early pre-market movers include Tesla  (TSLA) – Get Report, which gained just over 1% to change hands at $579.00 each following last night’s report of a steep decline of vehicle sales in China, and Ford Motor Co.  (F) – Get Report, which extended its recent rally by another 1%, to $16.15 per share, following yesterday’s bullish first half outlook from rival General Motors.  (GM) – Get Report.

Lululemon  (LULU) – Get Report shares were also active, but slipped 0.4% even after the athletic apparel company posted stronger-than-expected first quarter earnings and forecast full-year profits firmly ahead of Wall Street forecasts. 

In other markets, European stocks were little-changed ahead of the U.S. jobs data, while stocks in Asia slipped lower, lead by a 0.4% decline for the Nikkei 225 in Tokyo amid renewed questions over the fate of the delayed Summer Olympics.