Monthly Jobs Report May Lead To Choppy Trading On Wall Street

The major U.S. index futures are currently pointing to a roughly flat open on Friday, although the futures have fluctuated following the release of the Labor Department’s closely watched monthly jobs report.

Traders may be reluctant to make significant moves early on as they digest the repercussions of the Labor Department report, which showed much weaker than expected job growth in the month of August.

The Labor Department said non-farm payroll employment rose by 235,000 jobs in August after soaring by an upwardly revised 1.053 million jobs in July.

Economists had expected employment to jump by about 750,000 jobs compared to the spike of 943,000 jobs originally reported for the previous month.

Despite the much weaker than expected job growth, the unemployment rate fell to 5.2 percent in August from 5.4 percent in July, matching economist estimates.

While the substantial slowdown in the pace of job growth may raise concerns about the economic outlook, it may also ease concerns about the Federal Reserve scaling back stimulus in the near term.

Fed officials have indicated inflation has reached their target but they need to see further improvement in the labor market before they begin tapering asset purchases and raising interest rates.

After seeing early strength, stocks gave back ground in afternoon trading on Thursday but still managed to end the session modestly higher. With the uptick, the Nasdaq and the S&P 500 finished the day at new record closing highs.

The major averages all closed in positive territory. The Dow climbed 131.29 points or 0.4 percent to 35,443.82, the Nasdaq inched up 21.80 points or 0.1 percent to 15,331.18 and the S&P 500 rose 12.86 points or 0.3 percent to 4,536.95.

The modest strength on Wall Street came following the release of a Labor Department report showing a modest decrease in first-time claims for U.S. unemployment benefits in the week ended August 28th.

The report said initial jobless claims dipped to 340,000, a decrease of 14,000 from the previous week’s revised level of 354,000.

Economists had expected initial jobless claims to edge down to 345,000 from the 353,000 originally reported for the previous week.

With the modest decrease, jobless claims fell to their lowest level since hitting 256,000 in the week ended March 14, 2020.

The weekly jobless claims data came a day ahead of the release of the Labor Department’s more closely watched monthly jobs report.

Trading activity remained somewhat subdued ahead of the release of the monthly jobs report, which could impact the outlook for monetary policy.

In other U.S. economic news, the Commerce Department released a report showing the U.S. trade deficit narrowed in the month of July.

The Commerce Department said the trade deficit narrowed to $70.1 billion in July from a revised $73.2 billion in June.

Economists had expected the trade deficit to narrow to $71.0 billion from the $75.7 billion originally reported for the previous month.

The narrower trade deficit came as the value of exports jumped by 1.3 percent to $212.8 billion, while the value of imports dipped by 0.2 percent to $282.9 billion.

Energy stocks saw substantial strength on the day, moving sharply higher along with the price of crude oil.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index spiked by 2.8 percent, while the NYSE Arca Natural Gas Index and the NYSE Arca Oil Index surged up by 2.7 percent and 2.5 percent, respectively.

Considerable strength was also visible among tobacco stocks, as reflected by the 2.5 percent jump by the NYSE Arca Tobacco Index. The index ended the session at its best closing level in almost two years.

Networking, transportation and telecom stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are edging up $0.22 to $70.21 a barrel after jumping $1.40 to $69.99 a barrel on Thursday. Meanwhile, after falling $4.50 to $1,811.50 an ounce in the previous session, gold futures are climbing $13.40 to $1,824.90 an ounce.

On the currency front, the U.S. dollar is trading at 109.85 yen versus the 109.94 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1886 compared to yesterday’s $1.1875.

Asia

Asian stocks ended mixed on Friday as investors awaited the release of U.S. jobs data for clues about the Federal Reserve’s timelines for asset purchase tapering and interest rate hikes.

China’s Shanghai Composite Index ended down 15.31 points, or 0.4 percent, at 3,581.73 after the latest survey from Caixin revealed that the services sector in China dropped into contraction territory in August with a services PMI score of 46.7, down sharply from 54.9 in July.

Hong Kong’s Hang Seng Index dropped 188.44 points, or 0.7 percent, to 25,901.99 amid profit taking after four consecutive sessions of gains.

The private sector in Hong Kong expanded at a faster pace in August, the latest survey from Markit Economics showed, with a PMI score of 53.3, up from 51.3 in July.

Japanese shares rallied after Prime Minister Yoshihide Suga indicated he would step down as prime minister later this month. Investors pinned hopes that a new government will implement new economic measures to alleviate the prolonged impact of the covid-19 pandemic.

Investors shrugged off the latest survey from Jibun Bank showing that the services sector in Japan contracted at a faster pace in August.

The Nikkei 225 Index jumped 584.60 points, or 2.1 percent, to 29,128.11, while the broader Topix closed 1.6 percent higher at 2,015.45.

Market heavyweight SoftBank Group rose 0.7 percent and Uniqlo operator Fast Retailing climbed 2 percent. Screen Holdings, Tokyo Electron and Advantest gained 2-3 percent in the tech space.

Australian markets advanced, boosted by mining and energy stocks. The benchmark S&P/ASX 200 Index climbed 37.20 points, or half a percent, to 7,522.90 despite disappointing retail spending and service sector data. The broader All Ordinaries Index ended up 42.90 points, or 0.6 percent, at 7,826.70.

Mining giant BHP gained about 1 percent after tumbling nearly 7 percent the previous day on going ex-dividend. Rio Tinto rallied 2.5 percent, OZ Minerals advanced 1.6 percent and Orocobre soared 7 percent after a rise in Chinese iron ore futures. Origin Energy and Beach Energy rose about 1 percent, underpinned by a rise in oil prices.

Seoul stocks rebounded as foreign investors scooped up local shares ahead of the release of U.S. jobs data expected to show another strong month for hiring. The benchmark Kospi advanced 25.21 points, or 0.8 percent, to 3,201.06.

Drug maker SK Bioscience soared 9.1 percent on reports it will be included in the Korea Exchange’s K-New Deal Index next week. LG Electronics jumped 10 percent on reports that U.S. tech giant Apple could work with South Korean companies to launch “Apple Car” in 2024.

Europe

European stocks are turning in a mixed performance on Friday amid concerns the continued surge in the Delta variant of coronavirus is weakening economic growth.

The Eurozone private sector continued to see robust growth in August, but the momentum faded slightly from July’s 15-year peak, final data from IHS Markit showed earlier today.

The final composite output index fell to 59.0 in August from 60.2 in July, which was the highest since June 2006. The reading stood below the flash 59.5.

Elsewhere, the composite PMI reading for U.K. fell to 54.8 in August from 59.2 in July.

Eurozone retail sales fell 2.3 percent from the previous month in July, the EU’s statistics agency Eurostat said, coming in below forecasts for a 0.2 percent rise.

While the French CAC 40 Index has slid by 0.7 percent, the German DAX Index is just above the unchanged line and the U.K.’s FTSE 100 Index is up by 0.1 percent.

Discoverie Group shares have moved sharply higher. The electronic components manufacturer and supplier said that it has raised 55 million pounds ($76.1 million) via share placing.

Covestro shares have also risen following reports that the German chemicals maker plans to cut up to 1,700 of its 16,500 jobs worldwide.

Meanwhile, Ashmore Group shares have slumped after the investment manager reported a 12 percent dip in annual net revenue.

U.S. Economic Reports

U.S. job growth fell well short of economic estimates in the month of August, according to a closely watched report released by the Labor Department on Friday.

The Labor Department said non-farm payroll employment rose by 235,000 jobs in August after soaring by an upwardly revised 1.053 million jobs in July.

Economists had expected employment to jump by about 750,000 jobs compared to the spike of 943,000 jobs originally reported for the previous month.

The substantial slowdown in the pace of job growth came as employment in the leisure and hospitality sector was unchanged in August after surging up by 415,000 jobs in July.

The report also showed government employment edged down by 8,000 jobs in August after jumping by 255,000 jobs in the previous month.

Additionally, the Labor Department noted job growth in the professional and business services, transportation and warehousing, private education, and manufacturing sectors was partly offset by a loss of jobs in the retail sector.

Despite the much weaker than expected job growth, the unemployment rate fell to 5.2 percent in August from 5.4 percent in July, matching economist estimates.

The drop in the unemployment rate came as household employment jumped by 509,000 persons, while the labor force rose by just 190,000 persons.

At 10 am ET, the Institute for Supply Management is scheduled to release its report on service sector activity in the month of August.

The ISM’s services PMI is expected to drop to 61.5 in August from 64.1 in July, although a reading above 50 would still indicate growth in the sector.

Stocks In Focus

Shares of MongoDB (MDB) are moving sharply higher in pre-market trading after the database platform company reported a narrower than expected fiscal second quarter loss on better than expected revenues and provided upbeat guidance.

Cloud computing company PageDuty (PD) is also seeing significant pre-market strength after reporting a narrower than expected fiscal second quarter loss on revenues that exceeded analyst estimates. The company also provided a strong revenue outlook.

On the other hand, shares of Sphere 3D (ANY) may give back ground after the software company announced the pricing of a $192.1 million registered direct offering to help secure the initial order of 60,000 miners

Quanex Building Products (NX) is also seeing pre-market weakness after the housing materials maker reported fiscal third quarter earnings that came in slightly below analyst estimates.