Stock Futures Drop With Bonds on Strong Labor Data: Markets Wrap

(Bloomberg) — US stock futures pushed lower and Treasury yields spiked higher after two separate sets of data showed the American labor market remains strong.

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Contracts on the S&P 500 and the Nasdaq 100 slumped after US firms added more jobs than forecast in December, according to data from ADP Research Institute in collaboration with Stanford Digital Economy Lab. Stock futures fell further after initial jobless claims for the week ending Dec. 31 came in lower than estimates.

Treasuries extended their slide, with the 10-year yield around 3.75%. The dollar gained.

Investors are now awaiting nonfarm payrolls on Friday for further clues on the labor market and its implications for monetary policy, after Fed minutes showed officials cautioned against underestimating their will to keep interest rates high for some time. Traders are still pricing in rate cuts by end-2023.

“Pricing in the market still shows that investors continue to bet that the Fed will start cutting rates before the end of this year,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “Yes, there are some data pointing at slowing economic activity in the US, but the jobs market – which is closely watched by the Fed – remains surprisingly tight.”

Elsewhere, crude oil clawed back some losses after falling 9.5% in the past two days, with traders assessing the outlook for China’s demand and the impact of cold US weather on inventories.

Read More: Fed Affirms Inflation Resolve, Pushes Back Against Rate-Cut Bets

Key events this week:

Eurozone retail sales, CPI, consumer confidence, Friday

Germany factory orders, Friday

US nonfarm payrolls, factory orders, durable goods, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.5% as of 8:34 a.m. New York time

Nasdaq 100 futures fell 0.5%

Futures on the Dow Jones Industrial Average fell 0.3%

The Stoxx Europe 600 fell 0.1%

Currencies

The Bloomberg Dollar Spot Index rose 0.3%

The euro fell 0.3% to $1.0569

The British pound fell 0.9% to $1.1941

The Japanese yen fell 0.8% to 133.65 per dollar

Cryptocurrencies

Bitcoin was little changed at $16,805.45

Ether was little changed at $1,251.44

Bonds

The yield on 10-year Treasuries advanced six basis points to 3.75%

Germany’s 10-year yield advanced six basis points to 2.33%

Britain’s 10-year yield advanced four basis points to 3.53%

Commodities

West Texas Intermediate crude rose 2.1% to $74.37 a barrel

Gold futures fell 0.4% to $1,851 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Sagarika Jaisinghani.

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