US equity futures slipped and benchmark Treasury yields held close to the 4% mark on Thursday, as investors waited for labor market data that could reinforce expectations of a bigger Federal Reserve interest rate hikes.
US equity futures slipped and benchmark Treasury yields held close to the 4% mark on Thursday, as investors waited for labor market data that could reinforce expectations of a bigger Federal Reserve interest rate hikes.
Futures on the S&P 500 dipped 0.2% and those on the rate-sensitive Nasdaq slid 0.5%. In New York pre-market trading, chipmakers Nvidia Corp and Advanced Micro Devices Inc fell about 1%, while Tesla shed more than 3% after US regulators launched a probe over complaints about the steering wheel in some new models. Europe’s Stoxx 600 benchmark also dropped about half a percent.
Futures on the S&P 500 dipped 0.2% and those on the rate-sensitive Nasdaq slid 0.5%. In New York pre-market trading, chipmakers Nvidia Corp and Advanced Micro Devices Inc fell about 1%, while Tesla shed more than 3% after US regulators launched a probe over complaints about the steering wheel in some new models. Europe’s Stoxx 600 benchmark also dropped about half a percent.
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Investors are digesting Jerome Powell’s signaling after the Federal Reserve chief told lawmakers no decision had been made on the pace of the next move. He reiterated however, that an acceleration in tightening was still on the table, and rates may go higher than anticipated should economic data warrant.
The comments coincided with another round of US jobs figures that came in on the hot side, bolstering bets that policymakers will remain hawkish. Wagers now solidly tilt toward a half-point move in March, rather than the quarter-point earlier expected.
Weekly jobless claims due on Thursday are expected to have ticked up slightly from the previous week. They will set the stage for Friday’s monthly jobs report, with even just slightly stronger-than-forecast figures reinforcing bets for a bigger hike at the March 21-22 Fed meeting. Economists project a 225,000 increase in February payrolls, about half January’s blockbuster pace, but a figure in that range would confirm the US economy continues to add jobs at a strong rate.
“The Fed will pause only when they start to see weakness in the labor market and inflation starting to come down. After that they will want to leave interest rates high to squeeze out inflation expectations from the market,” said Charles Diebel, head of fixed income at Mediolanum International Funds.
“So rates will remain restrictive even when the economy is slowing or in recession, that turns the screw even further for markets,” he said.
Fears for the economy are reflected in Treasury bond markets, where two-year yields’ premium over their 10-year equivalent surpassed 110 basis points this week in what’s considered a reliable recession harbinger.
The inversion eased to about 104 basis points on Thursday as two-year yields slipped and 10-year borrowing costs held around 4%. The dollar also pulled back against a basket of currencies. However, many investors, including DoubleLine Capital LP Chief Investment Officer Jeffrey Gundlach expect short-dated yields to continue rising.
The higher-rate expectations hurt oil prices, with West Texas Intermediate futures trading around $77 a barrel, after sliding almost 5% over the previous two sessions.
Key events this week: US Challenger job cuts, initial jobless claims, household change in net worth, Thursday Bank of Japan policy rate decision, Friday US nonfarm payrolls, unemployment rate, monthly budget statement, Friday Some of the main moves in markets:
Stocks S&P 500 futures fell 0.4% as of 8:11 a.m. New York time Nasdaq 100 futures fell 0.6% Futures on the Dow Jones Industrial Average were little changed The Stoxx Europe 600 fell 0.6% The MSCI World index was little changed S&P 500 futures fell 0.4% Nasdaq 100 futures fell 0.6% The MSCI Asia Pacific Index was little changed The MSCI Emerging Markets Index fell 0.8% Currencies The Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.1% to $1.0557 The British pound rose 0.3% to $1.1886 The Japanese yen rose 0.8% to 136.23 per dollar The offshore yuan fell 0.2% to 6.9794 per dollar Cryptocurrencies Bitcoin fell 1.9% to $21,598.06 Ether fell 1.5% to $1,529.86 Bonds The yield on 10-year Treasuries advanced one basis point to 4.00% Germany’s 10-year yield advanced three basis points to 2.68% Britain’s 10-year yield advanced four basis points to 3.80% Commodities West Texas Intermediate crude was little changed Gold futures rose 0.1% to $1,820.80 an ounce This story was produced with the assistance of Bloomberg Automation.
This story has been published from a wire agency feed without modifications to the text.
