Dow set to edge higher as investors await jobs report following stock-market rout

U.S. stock-index futures on Friday pointed to modest gains for the three main benchmarks, after three straight days of losses, ahead of the Labor Department’s monthly employment report that comes as investors struggle with a steady rise in bond yields, driven by expectations of economic recovery from the COVID-19 pandemic in 2021.

How are stock benchmarks performing?

On Thursday, the Dow

ended 345.95 points, or 1.1%, lower at a one-month nadir of 30,924.14, the S&P 500

fell 51.25 points, or 1.3%, to 3,768.47, the Nasdaq Composite Index

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?

The Nasdaq Composite came close to a correction of 10% on Thursday and investors will be looking to February’s employment report to determine how much more pain bullish investors may face in the coming days.

Friday’s jobs figures are likely to show that the U.S. economy added 210,000 jobs last month, while the official unemployment rate is expected to hold steady at 6.3%. Such a gain would come after the economy lost 227,000 jobs in December and regained a scant 49,000 in January. In total, some 10 million jobs have been lost during the pandemic and still haven’t been recovered, and hiring has been sluggish over the past few months amid the COVID pandemic.

However, the jobs data is likely to improve as vaccination distribution and fiscal stimulus from Congress is expected to provide a jolt to the economy in the aftermath of the recession induced by the public health crisis.

On Thursday, the 10-year U.S. Treasury note yield hit its highest level since February at 1.557%, 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.

“The headline jobs number will also be important to watch, but with some of the pre-[nonfarm payrolls] leading indicators disappointing expectations, it may come in below forecasts,” wrote Fawad Razaqzada, market analyst at ThinkMarkets, in a daily note.  

“However, if it is unexpectedly strong, then this may mean good news for the dollar but bad news for stocks as it would increase speculation about tighter monetary conditions,” he noted.

Powell said on Thursday that the bond market sell off the past few weeks has his attention and the central bank wouldn’t sit back and let the financial market conditions tighten broadly, during a Wall Street Journal webinar. 

But some investors are worried that President Joe Biden’s $1.9 fiscal stimulus plan will overheat the economy and cause inflation and Powell did not 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 IncHIBB 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 LtdNCLH 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 IncBIG 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. Net income for the quarter to Jan. 

How are other assets faring?
  • The dollar was rising 0.3%, as measured by the ICE U.S. Dollar Index DXY.

  • 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 $1.61, or 2.5%, to trade at $65.44 a barrel, following a gain of over 4% on Thursday.

  • Gold futures GC00 was trading $8.10, or 0.5%, lower at 1,693 an ounce.

  • Equities traded mixed in Europe, with the pan-European Stoxx 600 index SXXP off 0.2% and London’s FTSE 100 UKX trading 0.3% 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%.

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