Futures Move To The Downside After Stronger-Than-Expected Jobs Data

(RTTNews) - The major U.S. index futures are currently pointing to a lower open on Friday, with stocks likely to give back ground after moving notably higher over the two previous sessions.

The futures slipped following the release of a closely watched Labor Department report showing much strong-than-expected U.S. job growth in the month of August.

The report said non-farm payroll employment surged by 162,000 jobs in August are rising by an upwardly revised 21,000 jobs in July.

Economists had expected employment to climb by 55,000 jobs compared to the loss of 23,000 jobs originally reported for the previous month.

The Labor Department also said the unemployment rate came in at 4.1 percent in August, unchanged from July. Economists had expected the unemployment rate to tick up to 4.2 percent.

With the report pointing to continued strength in the labor market, the data may lead to renewed concerns about the outlook for interest rates.

Treasury yields have jumped in reaction to the report, as the strong data could make the Federal Reserve more comfortable about raising interest rates later this month in an effort to fight stick inflation.

"Constantly changing interest rate expectations have kept investors on their toes this week," said Dan Coatsworth, head of markets at AJ Bell.

Selling pressure may be relatively subdued, however, as the data does still point to overall strength in the U.S. economy.

After advancing early in the session, stocks saw further upside over the course of the trading day on Thursday. The major averages all moved sharply higher on the day, extending the rebound seen in the previous session.

The major averages gave back some ground going into the end of the day but remained firmly positive. The Dow jumped 624.16 points or 1.2 percent to 53,686.11, the Nasdaq surged 366.23 points or 1.4 percent to 26,584.06 and the S&P 500 shot up 81.11 points or 1.1 percent to 7,747.71.

The rally on Wall Street partly reflected easing concerns about the outlook for interest rates, as CME Group's FedWatch Tool showed a notable decrease in the likelihood of a rate hike later this month.

CME Group's FedWatch Tool currently suggests there is still a 52.4 percent chance the Fed will raise rates by a quarter point, but that is down from 63.2 percent on Wednesday.

The decrease came after Federal Reserve Governor Christopher Waller indicated in an interview with Reuters that he is leaning towards keeping rates unchanged at the upcoming meeting.

Waller said he would be "inclined to support" leaving rates unchanged if the data due over the next two weeks continues to show "some signs of disinflation."

The Fed Governor's remarks contributed to a pullback by treasury yields, which also benefited stocks.

Traders were also looking ahead to Friday's closely watched monthly employment report for August, which could have a significant impact on the outlook for interest rates.

Gold stocks moved sharply higher along with the price of the precious metal, resulting in a 3.8 percent spike by the NYSE Arca Gold Bugs Index.

Substantial strength was also visible among brokerage stocks, as reflected by the 3.5 percent surge by the NYSE Arca Broker/Dealer Index.

Software stocks also showed a significant move to the upside, driving the Dow Jones U.S. Software Index up by 3.2 percent.

Snowflake (SNOW) helped lead the sector higher, soaring by 16.6 percent after reporting better than expected fiscal second quarter results and providing upbeat guidance.

Computer hardware and banking stocks also saw considerable strength, while oil service stocks showed a notable move to the downside.

Commodity, Currency Markets

Crude oil futures are slumping $0.88 to $90.42 a barrel after rising $0.29 to $91.67 a barrel on Thursday. Meanwhile, after surging $125.30 to $4,539.90 an ounce in the previous session, gold futures are plunging $86.50 to $4,453.40 an ounce.

On the currency front, the U.S. dollar is trading at 156.37 yen versus the 155.79 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1596 compared to yesterday's $1.1624.

Asia

Asian stocks followed Wall Street higher on Friday as concerns over U.S. interest rate hikes eased and focus shifted to the all-important U.S. jobs report later in the day.

Economists expect employment to climb by 55,000 jobs in August after a decline of 23,000 jobs in July. The unemployment rate is expected to tick up to 4.2 percent from 4.1 percent.

Brent crude futures fell slightly to around $95 a barrel but were up more than 8 percent so far this week due to renewed U.S.-Iran hostilities and elevated concerns over supply disruptions.

Iran claimed to have conducted retaliatory strikes on U.S. bases in Kuwait and UAE for a second day in a row even as U.S. President Donald Trump stated that Washington can attack Iran "anytime we want."

Iranian Vice President Mohammad Reza Aref said that Iran will adopt an "asymmetric" and "multi-layered" response to any future U.S. attacks and warned, "Dark months await the American economy."

The Japanese yen headed for its strongest week in a month as traders lifted bets on a Bank of Japan rate hike. The U.S. dollar index slipped, while gold edged up to $4,480 an ounce.

China's Shanghai Composite Index dropped 0.3 percent to 3,930.12 after the securities regulator proposed a major overhaul of the refinancing system.

Hong Kong's Hang Seng Index surged 1.7 percent to 25,650.87, snapping a four-day losing streak amid gains in major technology and financial shares.

Japanese markets rose sharply even as the yen extended gains after posting its biggest single-day advance in more than a month on rising bets for a Bank of Japan rate hike.

The Nikkei 225 Index jumped 1.3 percent to 65,020.94, snapping a four-session slide. The broader Topix Index finished marginally higher at 4,103.23.

Tech shares paced the gainers, with SoftBank Group spiking 11.8 percent and Kioxia Holdings adding 5.4 percent, buoyed by falling government bond yields.

Seoul stocks rallied as investors cheered the country's strong export figures related to AI. The Kospi Index shot up 1.4 percent to 6,687.21, with Samsung Electronics, SK Hynix, SK Innovation and S-Oil rising 2-6 percent.

Australian markets ended slightly lower as strong Q2 GDP data boosted expectations for another RBA rate hike in September following three rate increases earlier this year.

The benchmark S&P/ASX 200 Index slipped 0.2 percent to 9,005.90, dragged down by mining and energy stocks. The broader All Ordinaries Index ended little changed at 9,196.

BHP Group shares fell 2.4 percent and Woodside Petroleum dropped 1.2 percent. Nine Entertainment plunged 8.5 percent after WIN Group increased its economic interest in the company.

Across the Tasman, New Zealand's benchmark S&P/NZX-50 Index advanced 0.9 percent to 13,974.18, halting losses in the previous session as traders pushed the odds of next RBNZ rate hike to December from October.

Europe

European stocks have struggled for direction on Friday as focus shifts to the August U.S. nonfarm payrolls report, which could offer additional clues on the Federal Reserve's policy path.

Investors curbed their U.S. rate hike bets after Federal Reserve Governor Christopher Waller argued in favor of keeping rates unchanged at the upcoming policy meeting.

Meanwhile, German factory orders grew more than expected in July, driven by surging demand in ships, railway rolling stock and aircraft manufacturing, official data revealed today.

Factory orders increased 2.5 percent on a monthly basis in July but slower than the revised 3.7 percent expansion seen in June, Destatis reported. Orders were expected to rise 0.3 percent.

On a yearly basis, growth in factory orders accelerated to 13.1 percent in July from 7.2 percent in the prior month.

The French CAC 40 Index and the U.K.'s FSE 100 Index are both down by 0.1 percent, while the German DAX Index is up by 0.2 percent.

In corporate news, Volkswagen shares have soared as the German automaker announced plans to cut another 50,000 jobs as part of its transformation program 'Future Plan 2030' and said it would invest a three-figure billion sum over the coming years.

France's Alstom advanced 1.6 percent after it signed an agreement with VIA Rail Canada to design, engineer, manufacture and support a new Long-Distance, Regional and Remote fleet for passenger services across Canada.

U.S. Economic News

Employment in the U.S. increased by far more than economists had expected in the month of August, according to a closely watched report released by the Labor Department on Friday.

The report said non-farm payroll employment surged by 162,000 jobs in August are rising by an upwardly revised 21,000 jobs in July.

Economists had expected employment to climb by 55,000 jobs compared to the loss of 23,000 jobs originally reported for the previous month.

The Labor Department also said the unemployment rate came in at 4.1 percent in August, unchanged from July. Economists had expected the unemployment rate to tick up to 4.2 percent.