S&P Futures Tick Lower as Key U.S. Jobs Report Looms

March S&P 500 E-Mini futures (ESH24)are trending down -0.17% this morning as market participants turned their attention to the crucial U.S. nonfarm payrolls report for further clues on the U.S. rate outlook.

In Thursday’s trading session, Wall Street’s major indexes closed in the green, with the benchmark S&P 500 and tech-heavy Nasdaq 100 posting new record highs. Kroger Company (KR) climbed over +9% and was the top percentage gainer on the S&P 500 after the grocery store operator reported upbeat Q4 results and provided above-consensus full-year adjusted profit guidance. Also, chip stocks gained ground, with ON Semiconductor (ON) and Microchip Technology (MCHP) advancing more than +6%. In addition, Edwards Lifesciences (EW) rose over +6% after Bank of America Global Research upgraded the stock to Buy from Neutral with a price target of $105. On the bearish side, Victoria’s Secret & Co (VSCO) tumbled more than -29% after the lingerie retailer warned of potential losses in Q1 and issued weaker-than-expected FY24 revenue guidance.

The Labor Department’s report on Thursday showed that the number of Americans filing for initial jobless claims in the past week came in at 217K, in line with expectations. Also, U.S. Q4 nonfarm productivity rose +3.2% q/q, stronger than expectations of +3.1% q/q, while U.S. Q4 unit labor costs advanced +0.4% q/q, weaker than expectations of +0.7% q/q. Finally, the U.S. trade deficit increased to -$67.40B in January, wider than expectations of -$63.40B.

Federal Reserve Chair Jerome Powell told a Senate committee Thursday that the central bank is “not far” from the confidence required to begin reducing interest rates. “We’re waiting to become more confident that inflation is moving sustainably at 2%. When we do get that confidence - and we’re not far from it - it’ll be appropriate to begin to dial back the level of restriction,” Powell said while answering questions from the Senate Banking Committee. In addition, the Fed chief emphasized that rate reductions “can and will begin” this year while also acknowledging policymakers’ awareness of the risks associated with cutting rates too late.

Meanwhile, Cleveland Fed President Loretta Mester stated on Thursday that the U.S. central bank should be able to begin cutting interest rates later this year, although she prefers to observe more evidence indicating a further cooling of inflation. “I will gain confidence when I see inflation continuing to move down. The FOMC will then be in a position to start reducing the level of restrictiveness by moving the fed funds rate down. If the economy performs as anticipated, I expect we will find ourselves in that position sometime later this year,” Mester said in prepared remarks for a virtual speech at the European Economics and Financial Centre.

U.S. rate futures have priced in a 5.0% chance of a 25 basis point rate cut at the conclusion of the Fed’s March meeting and a 23.9% chance of a 25 basis point rate cut at the May meeting.

Today, all eyes are focused on U.S. Nonfarm Payrolls data in a couple of hours. Economists, on average, forecast that February Nonfarm Payrolls will come in at 198K, compared to the previous value of 353K.

Also, investors will likely focus on U.S. Private Nonfarm Payrolls data, which stood at 317K in January. Economists foresee the new figure to be 160K.

U.S. Average Hourly Earnings data will also be closely watched today. Economists anticipate February’s figures to be +0.2% m/m and +4.4% y/y, compared to the previous numbers of +0.6% m/m and +4.5% y/y.

The U.S. Unemployment Rate will be reported today as well. Economists foresee this figure to remain steady at 3.7% in February.

In addition, market participants will be anticipating a speech from New York Fed President John Williams.

In the bond markets, United States 10-year rates are at 4.076%, down -0.39%.

The Euro Stoxx 50 futures are up +0.14% this morning, on track for a seventh week of gains. Financial services and energy stocks outperformed on Friday, while retail stocks lost ground. Final data from Eurostat showed on Friday that the Eurozone GDP remained stable in the fourth quarter of 2023. Meanwhile, Bank of France Governor Francois Villeroy de Galhau stated Friday that the European Central Bank is very likely to reduce interest rates at its April or June meetings. “It seems very probable that there will be a first-rate cut in the spring,” he said. The ECB, as expected, left the deposit rate unchanged at a record 4% on Thursday. Also, the ECB cut its Eurozone 2024 GDP forecast to 0.6% from the previous estimate of 0.8% and lowered its Eurozone 2024 inflation forecast to 2.3% from the prior projection of 2.7%. In addition, ECB President Christine Lagarde indicated on Thursday that officials may be in a position to ease policy in June. In corporate news, Hellofresh Se (HFG.D.DX) tumbled over -42% following the meal-kit firm’s announcement that it no longer anticipates meeting its previously provided 2025 goals. At the same time, Ds Smith Plc (SMDS.L.EB) gained more than +7% after Mondi Plc agreed to acquire the company for 5.1 billion pounds ($6.5 billion).

Germany’s Industrial Production, Germany’s PPI, Eurozone’s Employment Change, and Eurozone’s GDP data were released today.

The German January Industrial Production stood at +1.0% m/m, stronger than expectations of +0.5% m/m.

The German January PPI has been reported at +0.2% m/m and -4.4% y/y, stronger than expectations of +0.1% m/m and -6.6% y/y.

Eurozone Employment Change came in at +0.3% q/q and +1.2% y/y in the fourth quarter, compared to expectations of +0.3% q/q and +1.3% y/y.

Eurozone GDP arrived at 0.0% q/q and +0.1% y/y in the fourth quarter, in line with expectations.

Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.61%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.23%.

China’s Shanghai Composite Index closed higher today. Tech-hardware and telecommunications stocks led the gains on Friday. Tech giants and mainland developers listed in Hong Kong also advanced. According to state media, China’s minister of industry and information technology vowed to consolidate and strengthen the country’s competitive advantages in the information and communications industry at the ongoing National People’s Congress meeting. Meanwhile, vehicle sales in China saw a sharp decline in February, driven by subdued demand during the Lunar New Year holiday and an intensifying price war in the world’s largest automobile market. According to the China Passenger Car Association, retail sales of passenger cars in China dropped to 1.095 million units, marking a 21% decrease compared to the previous year and a 46% decline from January. In corporate news, CNOOC Ltd surged nearly +9% following its announcement of a 100 million ton oilfield discovery in the South China Sea. Also, Anhui Huaheng Biotechnology Co Ltd climbed more than +9% after revealing plans to establish a subsidiary tasked with building a chemical construction plant for 700 million yuan.

Japan’s Nikkei 225 Stock Index closed slightly higher today. Bank stocks led the gains on Friday, with Mizuho Financial Group rising about +5% and Sumitomo Mitsui Financial advancing over +2%. Technology stocks also gained ground. Government data revealed on Friday that Japanese household spending in January experienced its most significant year-over-year decline in 35 months. Separately, Ministry of Finance data indicated that Japan’s current account sustained its surplus for a full year in January. Meanwhile, the yen strengthened against the dollar for a fourth day amid growing expectations that the Bank of Japan would raise interest rates for the first time since 2007. In corporate news, JP-Holdings climbed over +5% after the company reported a more than 25% increase in nine-month attributable profit and approximately 5% growth in net sales. Also, Osaka Gas surged more than +7% after announcing its intention to return 3% of shareholders’ equity as a dividend. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +1.39% to 21.95.

The Japanese January Household Spending came in at -2.1% m/m and -6.3% y/y, weaker than expectations of +0.4% m/m and -4.1% y/y.

The Japanese January Current Account n.s.a. stood at 0.438T yen, stronger than expectations of -0.330T yen.

The Japanese January Leading Index was at 109.9, stronger than expectations of 109.7.

Pre-Market U.S. Stock Movers

Marvell Technology Inc (MRVL) plunged over -5% in pre-market trading after the specialty semiconductor company issued weaker-than-expected Q1 guidance.

MongoDB (MDB) slumped more than -9% in pre-market trading after the company provided below-consensus Q1 and FY25 guidance.

DocuSign Inc (DOCU) climbed over +9% in pre-market trading after the electronic signature company posted upbeat Q4 results and offered better-than-expected Q1 and FY25 revenue guidance.

Gap Inc (GPS) gained more than +4% in pre-market trading after the retailer reported stronger-than-expected Q4 results.

Costco Wholesale Corp (COST) slid over -4% in pre-market trading after the big box retailer reported weaker-than-expected Q2 revenue.

Carvana Co (CVNA) rose more than +5% in pre-market trading after RBC Capital upgraded the stock to Sector Perform from Underperform with a price target of $90.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Friday - March 8th

Algonquin Power (AQN), Eve Holding (EVEX), Americas Car-Mart (CRMT), Genesco (GCO), Silvercrest Asset Management Group (SAMG), Lazydays (GORV).

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