U.S. stock-index futures turned solidly higher Friday morning as investors attempted to parse the latest monthly jobs update from the Labor Department, which came in far stronger than economsts’ consensus estimates.
The report represented good news for the economic rebound underway from the pandemic but suggested that a more rapid rise in inflation may be brewing in 2021. Still, investors seemed to take more stock in the improvement in the economy than the implications for borrowing costs.
How are stock benchmarks performing?
- Futures for the Dow Jones Industrial Average YM00, +0.76% YMH21, +0.76% were up 253 points, or 0.8%, to trade at around 31,131.
- S&P 500 index futures ES00, +0.73% ESH21, +0.73% advanced 29.15 points at 3,793.50, a climb of 0.7%.
- Nasdaq-100 futures NQ00, +0.42% NQH21, +0.42% were up 49.50 points, or 0.5%, to reach 12,504.50
On Thursday, the Dow DJIA, -1.11% ended 345.95 points, or 1.1%, lower at a one-month nadir of 30,924.14, the S&P 500 SPX, -1.34% fell 51.25 points, or 1.3%, to 3,768.47, the Nasdaq Composite Index COMP, -2.11% slid 274.28 points, or 2.1%, to reach 12,723.47, its lowest in three months and was within 27 basis points of a 10% correction.
What’s driving the market?
Markets are wrestling with good news on the economic front and what that means for bond yields after the U.S. created 379,000 new jobs in February — marking the biggest increase in four months.
On top of that, the official unemployment rate slipped to 6.2% from 6.3%, although economists widely believe the real rate is much higher, data from the Labor Department showed.
Economists surveyed by Dow Jones had expected unemployment to hold steady at 6.3% and 210,000 jobs to have been added.
The jobs data appear to show that vaccination distribution and fiscal stimulus from Congress is providing a jolt to the economy in the aftermath of the recession induced by the public health crisis.
But some investors may fear that the surge in job gains—coming after the jobs from December showed a loss of 227,000 and a scant 49,000 gain in January–may overheat the economy. That is partly why the Nasdaq Composite came close to a correction of 10% on Thursday.
“The US [nonfarm payrolls] number was booming and economic recovery is in full steam as the unemployment rate also ticked lower,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a Friday note. “However, this data has increased the inflation fear and this is pushing the stock futures lower,” the analyst wrote.
Friday morning, the yield on the 10-year Treasury note TMUBMUSD10Y, 1.599% was hovering around 1.61%, after hitting 1.557% on Thursday, as investors viewed comments from Federal Reserve Chairman Jerome Powell as not providing sufficient details on how the central bank might act to cool down the economy if it overheats. A too-hot economy would perhaps compel the Fed to raise interest rates quicker than they would prefer, analysts worry.
During a Wall Street Journal event Thursday, Powell said that the bond market sell-off during the past few weeks has his attention and the central bank wouldn’t sit back and let the financial market conditions tighten broadly.
But some investors are worried that President Joe Biden’s $1.9 fiscal stimulus plan will juice the economy and cause a rapid rise in inflation. Powell didn’t defuse those worries. The Senate on Thursday advanced Biden’s fiscal COVID aid package after making a series of adjustments, and is expected to give its approval within days.
Some of the volatility on Thursday also reflected a “great rotation” as some analysts describe a shift out of highflying technology stocks, viewed as expensive by some measures, to other areas of the market considered undervalued, including energy and financials, amid the rise in yields.
Which stocks are in focus?
- Chevron Corp. CVX said Friday it has entered an agreement to acquire the 33.925 million shares of Noble Midstream Partners it doesn’t already own in all stock deal.
- Hibbett Sports Inc. HIBB said Friday it had net income of $23.9 million, or $1.39 a share, in its fiscal fourth quarter to Jan. 30, up from $6.0 million, or 34 cents a share, in the year-earlier period.
- Shares of Norwegian Cruise Line Holdings Ltd. NCLH dropped 4.3% in premarket trading Friday, after the cruise operator said it started a public offering of 47.58 million share.
- Shares of Big Lots Inc. BIG rallied in premarket trading Friday, after the discount retailer reported a fiscal fourth-quarter profit that beat expectations and same-store sales that missed, amid a weaker-than-expected December, but provided an upbeat first-quarter outlook.
How are other assets faring?
- The dollar was rising 0.5%, as measured by the ICE U.S. Dollar Index DXY, at 92.093.
- Oil futures rose after the Organization of the Petroleum Exporting Countries said it will roll over current production cuts through April, the U.S. benchmark CL.1 gained $1.74, or 2.8%, to trade at $65.59 a barrel, following a gain of over 4% on Thursday.
- Gold futures GC00 was trading $8.40, or 0.5%, lower at 1,692.30 an ounce.
- Equities traded mixed in Europe, with the pan-European Stoxx 600 index SXXP flat and London’s FTSE 100 UKX trading 0.7% higher.
- Stocks pulled back in Asia: the Shanghai Composite SHCOMP ended Friday trade less than 0.1% lower, Hong Kong’s Hang Seng Index HSI lost 0.5%, and China’s CSI 300 000300 fell 0.3%, while Japan’s Nikkei 225 NIK shed 0.2%.