Stock futures fell after data showed labor-market strength, with investors waiting to hear from Federal Reserve Chair Jerome Powell on whether it would be realistic to expect a slowdown in the pace of rate hikes going forward.
(Bloomberg) — Stock futures fell after data showed labor-market strength, with investors waiting to hear from Federal Reserve Chair Jerome Powell on whether it would be realistic to expect a slowdown in the pace of rate hikes going forward.
S&P 500 contracts posted mild losses, while two-year US yields — which are more sensitive to imminent Fed moves — were little changed. The Treasury halted the longest string of cutbacks to its quarterly sales of longer-term debt in about eight years, showcasing the end of a period of historic reduction in the fiscal deficit.
Private payrolls rose 239,000 last month after a revised 192,000 gain in September, according to data from ADP Research Institute in collaboration with Stanford Digital Economy Lab. The median forecast in a Bloomberg survey of economists called for a 185,000 advance. A resilient job market has fueled fast wage growth, contributing to rapid inflation and putting pressure on the Fed to aggressively tighten monetary policy.
The Fed is expected to raise rates by 75 basis points on Wednesday as the central bank extends its most aggressive tightening campaign since the 1980s. The decision will be announced at 2 p.m. in Washington and Powell will hold a press conference 30 minutes later. He may emphasize policymakers remain steadfast in their inflation fight, while leaving options open for their gathering in mid-December, when markets are split between another big move or a shift to 50 basis points.
Read: US PREVIEW: Powell to Signal Slower Hikes, Higher Endpoint
Inflation is too high at the moment for the Federal Reserve to start hinting at loosening financial conditions, making the stock market’s recent optimism “misplaced,” according to Barclays Plc strategists. A Bank of America Corp. contrarian indicator based on Wall Street strategists’ allocation views is nearest to flashing “buy” US equities in more than five years.
“The indicator is the closest it has been to a ‘Buy’ signal since early 2017 and is closer to a ‘Buy’ signal than a ‘Sell’ signal for a sixth consecutive month,” strategists including Savita Subramanian wrote. “Wall Street’s consensus equity allocation has been a reliable contrarian indicator over time.”
The S&P 500 is currently trading at around 3,860, which is neither too expensive for short sellers, nor too cheap for dip-buyers, strategists from Citigroup Inc. to SpotGamma say. While there have been bets on moves in either direction, a big chunk of the crowd is willing to wait until it hears the Fed’s actual message — even if that leads to near-term pain.
Multiple screen shots purporting to show the world’s second-largest economy is moving closer to a reopening have been circulating on social-media platforms since late Monday. While none of them have been confirmed — and all outward signs from Chinese officialdom are that the Covid Zero policy remains intact — investors have propelled the Hang Seng China Enterprises Index to an 8.4% two-day gain in Hong Kong.
China has ordered a seven-day lockdown of the area around Foxconn Technology Group’s main plant in Zhengzhou, a move that will severely curtail shipments in and out of the world’s largest iPhone factory.
Key events this week:
- Bank of England rate decision, Thursday
- US factory orders, durable goods, trade, initial jobless claims, ISM services index, Thursday
- ECB President Christine Lagarde speaks, Thursday
- US nonfarm payrolls, unemployment, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 fell 0.2% as of 8:43 a.m. New York time
- Futures on the Nasdaq 100 were little changed
- Futures on the Dow Jones Industrial Average fell 0.3%
- The Stoxx Europe 600 fell 0.2%
- The MSCI World index rose 0.1%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.2% to $0.9893
- The British pound was little changed at $1.1490
- The Japanese yen rose 0.8% to 147.15 per dollar
Cryptocurrencies
- Bitcoin fell 0.4% to $20,400.07
- Ether fell 1.3% to $1,554.46
Bonds
- The yield on 10-year Treasuries declined one basis point to 4.03%
- Germany’s 10-year yield was little changed at 2.14%
- Britain’s 10-year yield declined one basis point to 3.46%
Commodities
- West Texas Intermediate crude was little changed
- Gold futures rose 0.5% to $1,657.70 an ounce
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