The major U.S. index futures indicate a significant downturn as markets head into Friday's session, with the anticipation of stocks experiencing considerable pressure. This follows the previous session's lackluster performance, which ended with little change.
A notable shift towards the downside in futures has been observed following the highly anticipated release of the Labor Department’s monthly employment report. The data revealed a much stronger job growth than anticipated for December, intensifying concerns about the future trajectory of interest rates.
The Labor Department reported a surge in non-farm payroll employment, growing by 256,000 jobs in December, following a revised increase of 212,000 jobs in November. Economists had projected a more modest rise of 160,000 jobs, compared to the initially reported 227,000 jobs for the previous month. Additionally, the unemployment rate dipped to 4.1 percent in December from 4.2 percent the previous month, contrary to economists' expectations of a stable rate.
While this report underscores continued robustness in the labor market, it also likely bolsters the Federal Reserve's plans to methodically adjust interest rates over the coming months.
The market experienced erratic trading on Wednesday, following a steep decline on Tuesday. The major indices wavered around the baseline before settling with mixed outcomes. The tech-centric Nasdaq slipped by 10.80 points or 0.1 percent to close at 19,478.87, whereas the Dow added 106.84 points or 0.3 percent to 42,635.20, and the S&P 500 ticked up 9.22 points or 0.2 percent to 5,918.25.
This volatility stemmed from uncertainties about interest rate expectations, given the mixed signals from U.S. employment data. While payroll processor ADP indicated a slowdown in private sector job growth for December, the Labor Department reported that weekly jobless claims unexpectedly dropped to their lowest in nearly eleven months.
ADP reported an increase in private sector employment by 122,000 jobs in December, following a rise of 146,000 jobs in November. Economists had anticipated growth of 140,000 jobs. The report highlighted a deceleration in hiring across several industries, with the manufacturing sector experiencing a third consecutive month of job reductions. "The labor market decelerated to a more modest pace of growth in December, with slower hiring and pay increases," noted ADP Chief Economist Nela Richardson.
Meanwhile, a separate Labor Department report showed a surprising further decline in initial jobless claims for the week ending January 4th. Initial claims fell to 201,000, a decrease of 10,000 from the prior week's unchanged level of 211,000, defying expectations of a rise to 218,000. This unexpected drop brought jobless claims to their lowest since they were last at 200,000 in the week ending February 17, 2024.
The Labor Department’s forthcoming monthly jobs report could shed additional light on labor market strength. Despite the release of the Federal Reserve's recent monetary policy meeting minutes, the details offered little insight into future interest rate prospects, beyond an emphasis on a "careful approach" to forthcoming decisions.
Most major sectors displayed only modest changes, contributing to the overall market's subdued performance. However, gold stocks saw significant gains, with the NYSE Arca Gold Bugs Index jumping by 2.5 percent, tied to a hike in gold prices. Natural gas and housing stocks also showed strength, while equities in steel, computer hardware, and semiconductors moved lower.
**Commodity and Currency Markets**
Crude oil futures are surging, rising $2.87 to $76.70 a barrel, following a $0.60 increase to $73.92 a barrel on Thursday. Conversely, gold futures, after an $18.40 surge to $2,690.80 an ounce in the previous session, are slightly declining by $0.50 to $2,690.30 an ounce.
In currency markets, the U.S. dollar stands at 158.73 yen, up from 158.14 yen at Thursday's New York close. Against the euro, the dollar is valued at $1.0242, compared to $1.0300 the previous day.
**Asia**
Asian markets pulled back on Friday, primarily due to apprehensions surrounding the impending U.S. jobs report and ongoing concerns about China’s growth. Traders also remained vigilant for potential intervention by Japanese authorities to stabilize the yen. The dollar maintained its stability in Asian trading, poised to extend its longest weekly winning streak in over a year.U.S. Treasury yields for the 10-year bonds remained near nine-month highs as Federal Reserve officials expressed concerns about potential inflationary pressures from President-elect Donald Trump's policies.
Gold saw a slight increase, settling near a four-week high, while oil prices continued on track for a third consecutive week of gains. This rise was bolstered by the cold weather affecting parts of the United States and Europe, which has escalated demand for winter fuels.
In China, markets declined due to fears of slowing economic growth and deflation. The Shanghai Composite Index dropped by 1.3% to close at 3,168.52. Meanwhile, the yuan reached a new 16-month low following the People's Bank of China's decision to halt government bond purchases amidst record-low bond yields.
Shares of Sunac China plummeted by 26% after a liquidation petition against the property developer was announced. In Hong Kong, the Hang Seng Index fell by 0.9% to 19,064.29, dragged down by declining real estate and tech stocks amid ongoing U.S.-China tensions and concerns in the property sector.
Japanese markets also experienced declines due to uncertainties surrounding Federal Reserve and Bank of Japan policies. The Nikkei 225 Index fell by 1.1% to 39,190.40, while the broader Topix Index decreased by 0.8% to 2,714.12. Fast Retailing, the owner of Uniqlo, dropped by 6.5% following disappointing earnings, whereas Advantest, a supplier to Nvidia, surged by 5.1%.
In Seoul, the Kospi ended its five-day winning streak, declining by 0.2% to 2,515.78. Losses were primarily led by tech stocks, battery makers, and chemical companies. Conversely, Hyundai Motor saw a rise after announcing a strategic partnership with Nvidia for AI advancements in future mobility, resulting in its affiliate, Kia Corp, rallying by 2.2%.
Australian markets closed lower, affected by declines in banking, energy, and tech-related stocks. The S&P/ASX 200 Index went down by 0.4% to 8,294.10, despite weaker-than-expected retail sales data that increased speculation on a potential rate cut as soon as next month. Westpac Banking Corp decreased by 1.7% after Morgan Stanley downgraded its rating to underweight. In New Zealand, the S&P/NZX 50 Index slid by 0.4% to 12,895.98.
In Europe, stocks faced uncertainty as bond yields stayed high in anticipation of the crucial U.S. jobs report. Market sentiment was weighed down by ongoing concerns over Trump's policies, with Fed funds futures prices indicating only about a 7% probability of a quarter-point rate cut at the Federal Reserve's forthcoming policy meeting.
In light of minimal economic data, French industrial production increased by 0.2% in November, bouncing back from a 0.3% decline in October, as per INSEE. Economists had forecasted a 0.1% decrease. Additionally, French household consumption grew unexpectedly by 0.3% month-on-month in November, offsetting a downwardly revised 0.3% drop in October, whereas a 0.1% rise was anticipated.
The FTSE 100 Index in the U.K. dipped by 0.4%, while the French CAC 40 Index rose by 0.1%, and the German DAX Index increased by 0.3%. Corporate updates included ASML International rising by about 0.5% after TSMC reported higher-than-expected quarterly sales. Ubisoft Entertainment fell by 8% following another delay in the release of its "Assassin's Creed" franchise. Philips saw a 1.5% increase after announcing new executive appointments, and Nordex SE climbed over 2% after securing orders for 259 MW of wind turbines in Spain.
In the U.S., a Labor Department report showed a stronger-than-expected rise in employment for December, with non-farm payrolls expanding by 256,000 jobs, surpassing forecasts of a 160,000 increase. November's figure was revised down to 212,000 from 227,000. The unemployment rate slightly decreased to 4.1% from 4.2%, contrary to expectations of an unchanged rate.
At 10 a.m. ET, the University of Michigan is slated to release its preliminary consumer sentiment index for January, expected to increase to 74.5 from December's 74.0.