Stock futures opened slightly lower Thursday evening ahead of a key labor market report, which is set to offer a fuller picture of the labor market’s recovery and help inform the next moves for monetary policymakers.
Contracts on the S&P 500 were flat to down slightly as the overnight session kicked off. The blue-chip index closed at a record high on Thursday, shaking off declines from a day earlier. The Dow and Nasdaq also ended in positive territory.
For investors, all eyes on Friday will be fixed on the Labor Department’s July jobs report. The print is expected to show a whopping 865,000 jobs came back last month as the unemployment rate fell to the lowest level since March 2020.
With the Delta variant running rampant across the U.S. and other constraints to the labor market still at play, some economists are bracing for the possibility of downside in Friday’s report. And just earlier this week, ADP’s closely watched print on private payrolls registered as a sharp disappointment, with only 330,000 jobs coming back versus the nearly 700,000 expected. While the ADP report has historically not tracked perfectly with the Labor Department’s “official” monthly jobs reports, it has tended to be a good directional indicator of trends in the labor market.
For equity investors, however, an in-line or weaker-than-expected print may not necessarily be a negative.
“The market actually wants a bad jobs report, perverse as that sounds,” Opimas CEO Octavio Marenzi, told Yahoo Finance, adding it wants “the job numbers to come in weak so the Fed has a reason to continue its monetary policy.”
Namely, the Federal Reserve has suggested it was looking for more progress in the economic recovery before moving to announce or actually implement changes to its highly accommodative policies. Earlier this week, Federal Reserve Governor Christopher Waller said that he would support announcing tapering of the central bank’s crisis-era bond purchases by September if the next couple jobs report come in strongly. Likewise, Federal Reserve Vice Chair Richard Clarida said he would back an interest rate increase in 2023 if the economic recovery continues on its current trajectory.
Other economists suggested this month’s jobs report could be as strong or stronger than anticipated, but that this would serve as an only backwards-looking indicator given the deceleration in growth occurring as a result of the latest wave of virus concerns.
“July is a seasonally bad time for state and local government employment as the school year ends but since the layoffs were front loaded, there is a chance the seasonal factor makes an outsize contribution for this area of public sector employment,” Neil Dutta, head of macro research at Renaissance Macro Research, wrote in an email. “I think the broader story is that even if July is strong, it won’t matter because no one should expect a repeat performance in August with economic confidence waning due to the rise in COVID hospitalizations in parts of the country.”
6:10 p.m. ET Thursday: Stock futures hug the flat line before jobs report
Here’s where markets were trading Thursday evening:
S&P 500 futures (ES=F): -1.75 points (-0.04%) at 4,419.75
Dow futures (YM=F): -19 points (-0.05%) to 34,924.00
Nasdaq futures (NQ=F): -2 points (-0.01%) to 15,165.75
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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