Stock futures little changed ahead of key June jobs report

Commuters exit a subway station on Wall Street near the New York Stock Exchange.

Michael Nagel | Bloomberg | Getty Images

Futures contracts, pegged to major US stock indices, held steady at the start of the Thursday night night session as Wall Street waited for the key June job report and another look at the rebounding US jobs market.

Contracts linked to the Dow Jones Industrial Average were down 9 points, while those linked to the S&P 500 and Nasdaq 100 fell less than 0.1% each.

US investors are waiting for the major monthly job report from the Department of Labor, which will reveal on Friday how many payrolls American employers have added over the past month.

Economists expect the number of non-farm workers to have increased by 706,000 jobs in June and that the unemployment rate fell from 5.8% to 5.6%, according to the Dow Jones. If employers created as many jobs as expected, pressures would surpass 559,000 jobs created in May.

The average hourly wage is estimated to have increased 0.3% month-on-month and has increased 3.6% over the past 12 months. The government’s weekly first-time jobless claims report, released Thursday morning, hit 364,000, marking a low in the pandemic-era.

While the headline count is important to Friday’s job creation, traders are likely to examine the change in the average hourly wage for signs of an unexpected spike in labor costs. Labor is often the largest cost driver for American businesses, and spikes in wages can precede wider inflation across the U.S. economy as businesses seek to pass rising production costs on to their customers.

Inflation is the responsibility of the Federal Reserve, which could contain its loose monetary policies sooner than expected – and potentially anger the markets – if prices rise too quickly.

“For the first time in over two years, the upcoming job report could lead the Fed to become more aggressive about reducing housing.

“While I don’t expect tomorrow’s job report to materially change the Fed’s outlook, the fact is that this market has been aggressively pricing in 1) temporary inflation and 2) a still very cautious Fed,” he added. And “if one of these ideas is challenged in the next few months by wages or the number of jobs, then the chances of a correction (not a withdrawal, but a correction) increase.”

Despite this risk, equity markets have seen a strong run in the past few days and continued to record highs on Thursday.

The S&P 500 rose 0.5% during Thursday’s regular session to hit its sixth record high in a row, finishing above 4,300 for the first time at 4,319.94. The Dow Jones Industrial Average rose 131 points to close at 34,633.53 while the tech-heavy Nasdaq Composite climbed 0.1% to 14,522.38.

These gains contributed to the already robust market returns in 2021.

The economic recovery, sparked by vaccine use and looser Covid-19 restrictions, helped the S&P 500 jump more than 14% in the first half of the year. The Dow and Nasdaq also saw double-digit percentage gains for the six months ended June 30.

For the week, the Nasdaq Composite was up 1.1% at Thursday’s close. The S&P 500 and the Dow gained 0.9% and 0.6%, respectively.

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