US equity futures fluctuated as the latest jobs data suggested the Federal Reserve has room for more tightening, while a rally driven by excitement over prospects for artificial intelligence-rated stocks cooled.
(Bloomberg) — US equity futures fluctuated as the latest jobs data suggested the Federal Reserve has room for more tightening, while a rally driven by excitement over prospects for artificial intelligence-rated stocks cooled.
Employment growth at US companies last month exceeded all projections, highlighting a durable labor market that continues to buttress the economy. First-time claims for unemployment benefits were broadly in line with economists’ estimates last week, a separate reports showed.
Contracts on the S&P 500 and Nasdaq 100 were flat. Software maker C3.ai Inc. plunged as much as 22% after a disappointing sales outlook. Nvidia Corp., whose meteoric rise had fueled the AI rally, was steady after losing some ground on Wednesday.
There were some positives for stocks: Passage of the debt-ceiling deal struck by House Speaker Kevin McCarthy and President Joe Biden means the bill will be sent to the Senate days before the June 5 default deadline. The signs of optimism were helped along by comments from Fed officials who backed the possibility of holding rates unchanged the next meeting. But the unevenness of recent market gains has raised doubts about the sustainability of the advance.
“The recent stock market strength is misleading because almost all of the stocks in the S&P 500, with the exception of a few big tech stocks, are actually flat so far this year,” said Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management. “The lack of market breadth, coupled with the past two quarters in a row of decelerating earnings, means there is still more downside risk ahead.”
Among other individual movers, Salesforce Inc. slumped abut 6% after it gave a lackluster outlook for future sales. Advance Auto Parts Inc. extended a decline after cutting earnings and sales guidance. Dollar General Corp. plunged after the discount retailer slashed its annual profit forecast. NetApp Inc. gained after the cloud services provider’s results topped expectations.
Banks and carmakers were among the leading performers in the Stoxx Europe 600 index as data showed euro-area inflation slowed more than analysts’ estimates in May. Adnoc Logistics & Services, the maritime logistics unit of Abu Dhabi’s main energy company, soared as much as 52% on its debut after a hugely oversubscribed initial public offering. Airbus SE gained after Reuters reported a rise in aircraft deliveries.
“Finally, some good news is driving today’s optimism,” said Ludovica Scotto di Perta, a structured-product specialist at Swissquote Bank SA. “US raising the debt ceiling and sentiment that the Fed will pause are boosting risk appetite. It might only be temporary but we will take anything at this point.”
The euro rallied against the dollar after data showed underlying inflation in the euro zone dipped by more than expected in May, though that may not stop the European Central Bank from raising rates. European Central Bank Governing Council member Olli Rehn said the bank won’t contemplate lowering borrowing costs before core consumer-price growth slows in a continuous manner.
A gauge of the dollar dipped, while Treasury yields ticked higher.
Hopes for a Fed pause were partly pared back after Wednesday’s JOLTS jobs report for April showed more than 10 million openings, the highest in three months and above consensus estimates.
But Fed Governor Philip Jefferson said the central bank is inclined to keep interest rates steady in June to assess the economic outlook. His remarks were echoed by Philadelphia Fed President Patrick Harker, who said, “I think we can take a bit of a skip for a meeting.”
Most Asian benchmarks rose, though gains in Chinese stocks faded as investors studied mixed readings on the country’s manufacturing activity. Caixin manufacturing data for May showed an expansion, exceeding forecasts for a small contraction. The numbers followed official figures Wednesday that showed a further contraction in activity.
Industrial metals climbed from six-month lows, led by copper and nickel. China’s sluggish economy has been a key driver of weakness demand for raw materials.
Key events this week:
- US construction spending, initial jobless claims, ISM Manufacturing, Thursday
- ECB President Christine Lagarde speaks at conference, Thursday
- Fed’s Patrick Harker speaks at webinar, Thursday
- US unemployment, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.1% as of 8:35 a.m. New York time
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average fell 0.2%
- The Stoxx Europe 600 rose 0.5%
- The MSCI World index rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.1% to $1.0703
- The British pound rose 0.2% to $1.2467
- The Japanese yen was little changed at 139.32 per dollar
Cryptocurrencies
- Bitcoin fell 0.7% to $26,928.87
- Ether fell 0.1% to $1,863.56
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.63%
- Germany’s 10-year yield was little changed at 2.27%
- Britain’s 10-year yield declined three basis points to 4.15%
Commodities
- West Texas Intermediate crude rose 0.4% to $68.37 a barrel
- Gold futures fell 0.3% to $1,975.80 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Anchalee Worrachate and Sagarika Jaisinghani.
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