Stock futures rose early Friday, building on the S&P 500’s record close, as investors awaited key jobs data that could help determine the path of interest rates in the months ahead.
S&P 500 futures pointed 0.2% higher, Nasdaq futures jumped 0.4% and futures on the Dow Jones Industrial Average were flat ahead of the open. All three major indexes rose Thursday as more weak labor data solidified bets that the Federal Reserve will lower borrowing costs when it meets later this month.
Traders are currently pricing in a 99% of a quarter-point cut in September, according to CME’s FedWatch tool. Friday’s job report could still change that and there’s also consumer price index inflation data next week before the Fed’s decision on September 17. The market is split on whether the central bank cuts rate two or three times between now and the end of the year and the next two weeks could go a long way to answering that question.
“Today sees the first of the three massive days for markets in the next nine business days,” Deutsche Bank strategist Jim Reid said in a note. He added that growing weakness in the labor market is “top of mind given that last month’s jobs report was unexpectedly bad.”
That trend was in evidence Thursday as ADP private payrolls data showed fewer private-sector jobs were created than expected in August, while jobless claims rose to the highest level since mid-June.
For August’s nonfarm payrolls data, economists are expecting 80,000 jobs created–higher than July’s 73,000–with unemployment staying at 4.2%.
“While the difference between a “good” and a “bad” report may only be a few thousand jobs, it would take a significantly stronger-than-expected payrolls figure to challenge the prevailing market view that the Federal Reserve is on course to cut interest rates at its September meeting,” Barclays Private Bank strategist Julien Lafargue said.
The yield on the 10-year Treasury ticked higher to 4.167% early Friday, while the U.S. Dollar Index slipped 0.2% to 98.11.