U.S. Stocks May Lack Direction Early On As Traders Digest Jobs Report

The major U.S. index futures are currently pointing to a roughly flat open on Friday, with stocks likely to extend the lackluster performance in the previous session in early trading.

The futures have fluctuated following the release of a closely watched Labor Department report showing employment in the U.S. increased by less than expected in the month of July.

The report said non-farm payroll employment climbed by 187,000 jobs in July after rising by a downwardly revised by 185,000 jobs in June.

Economists had expected employment to jump by 200,000 jobs compared to the addition of 209,000 jobs originally reported for the previous month.

Meanwhile, the Labor Department said the unemployment rate edged down to 3.5 percent in July from 3.6 percent in June. Economists had expected the unemployment rate to remain unchanged.

The Labor Department also said average hourly employee earnings increased by $0.14 or 0.4 percent to $33.74 in July.

Annual wage growth came in at 4.4 percent in July, unchanged from June. Economists had expected the pace of growth to slow to 4.2 percent.

A mixed reaction to earnings news from tech giants Amazon (AMZN) and Apple (AAPL) may also contribute to choppy trading on Wall Street.

Shares of Amazon are moving sharply higher in pre-market trading after the online retail giant reported better than expected second quarter and provided upbeat revenue guidance for the current quarter.

On the other hand, shares of Apple are seeing notable pre-market weakness after the company reported fiscal third quarter earnings that beat analyst estimates but a continued decrease in revenues.

After an early move to the downside, stocks fluctuated over the course of the trading session on Thursday. The major averages bounced back and forth across the unchanged line before closing modestly lower.

The Dow slipped 66.63 points or 0.2 percent to 35,215.89, the Nasdaq edged down 13.73 points or 0.1 percent to 13,959.72 and the S&P 500 dipped 11.50 points or 0.3 percent to 4,501.89.

The early weakness on Wall Street partly reflected continued concerns about U.S. debt after credit rating agency Fitch Ratings unexpectedly downgraded the United States’ credit rating on Tuesday.

Fitch downgraded the U.S.’ long-term foreign-currency issuer default rating to AA+ from AAA, citing a “steady deterioration in standards of governance over the last 20 years.”

“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” Fitch said.

Selling pressure remained somewhat subdued, however, as traders seemed reluctant to make significant moves ahead of the release of the closely watched monthly jobs report.

Some traders subsequently took the opportunity to pick up stocks at relatively reduced levels following the sell-off seen on Wednesday.

On the U.S. economic front, a report released by the Labor Department showed a modest increase in first-time claims for U.S. unemployment benefits in the week ended July 29th.

The Labor Department said initial jobless claims crept up to 227,000, an increase of 6,000 from the previous week’s unrevised level of 221,000. The uptick in jobless claims matched economist estimates.

The Institute for Supply Management also released a report showing a modest slowdown in the pace of growth in U.S. service sector activity in the month of July.

The ISM said its services PMI slipped to 52.7 in July from 53.9 in June, although a reading above 50 still indicates growth. Economists had expected the index to edge down to 53.0.

Despite the lackluster performance by the broader markets, airline stocks showed a substantial move to the downside, dragging the NYSE Arca Airline Index down by 3.2 percent to its lowest closing level in almost two months.

Southwest Airlines (LUV) posted a steep loss after Jefferies downgraded its rating on the company’s stock to Underperform from Hold.

Significant weakness was also visible among interest rate-sensitive utilities stocks, as reflected by the 2.7 percent plunge by the Dow Jones Utility Average.

Networking, housing and chemical stocks also saw considerable weakness, while natural gas stocks showed a strong move to the upside along with the price of the commodity.

Commodity, Currency Markets

Crude oil futures are rising $0.19 to $81.74 a barrel after surging $2.06 to $81.55 a barrel on Thursday. Meanwhile, after slipping $6.20 to $1,968.80 an ounce in the previous session, gold futures are inching up $1.60 to $1,970.40 an ounce.

On the currency front, the U.S. dollar is trading at 142.30 yen versus the 142.58 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0981 compared to yesterday’s $1.0949.

Asia

Asian stocks ended mixed on Friday as investors digested the Bank of England’s rate hike to a 15-year high and encouraging earnings updates from tech giants Apple and Amazon.

A cautious undertone prevailed ahead of U.S. jobs data that could offer further clues on the health of the U.S. economy and Federal Reserve’s rate hike path.

Economists expect nonfarm payrolls to have risen by 200,000 jobs last month after an increase of 209,000 jobs in June.

Gold held near three-week lows and the dollar edged lower, a day after Fitch Ratings cut its credit rating on U.S. government debt.

Oil prices were on track for a sixth weekly gain after Saudi Arabia and Russia, the world’s second- and third-largest crude producers, pledged to cut output through next month.

Chinese shares edged up slightly after the country’s central bank governor pledged more financial resources to support private firms and promote the sound development of the real estate sector.

The benchmark Shanghai Composite Index inched up 0.2 percent to 3,288.08, while Hong Kong’s Hang Seng Index climbed 0.6 percent to 19,539.46.

Japanese shares fluctuated before finishing slightly higher, led by financials and chip-related stocks. The Nikkei 225 Index crept up 0.1 percent to 32,192.75, while the broader Topix Index settled 0.3 percent higher at 2,274.63.

Mitsubishi UFJ Financial and Sumitomo Mitsui Financial both rose about 2 percent. Game maker Nintendo tumbled 2.9 percent despite logging a record net profit in the April-June period and keeping its full-year profit forecast unchanged.

Seoul stocks ended a choppy session little changed, with the Kospi finishing marginally lower at 2,602.80 ahead of the release of U.S. jobs data. Mobile messenger KakaoTalk plunged 2.8 percent on weak earnings.

Australian markets rose but the ended the week lower, snapping a three-week winning streak. The benchmark S&P/ASX 200 Index gained 0.2 percent to close at 7,325.30.

Mesoblast plummeted 56.9 percent to a decade low after the U.S. health regulator rejected its cell therapy for children under 12 years of age for treating a type of complication that occurs after a stem cell or bone marrow transplant.

ResMed slumped 9.3 percent after its fourth-quarter earnings missed analyst estimates. The broader All Ordinaries Index ended 0.2 percent higher at 7,535.90.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index ended little changed with a positive bias at 11,943.20.

Europe

European stocks are turning in a mixed performance on Friday after three days of losses as traders digest the closely watched monthly U.S. jobs report.

Closer to home, German factory orders unexpectedly rebounded in June, driven by foreign demand, while French industrial production declined 0.9 percent in June following a revised 1.1 percent jump in May, separate reports showed.

While the French CAC 40 Index is up by 0.1 percent, the U.K.’s FTSE 100 Index and the German DAX Index are both down by 0.4 percent.

Credit Agricole shares have moved sharply higher. The French lender reported better-than-expected earnings for the second quarter, driven by strong insurance and consumer finance performances. Peer BNP Paribas has also climbed on share buyback news.

Deutsche Wohnen has also risen after saying it is examining whether and when a potential sale of individual portfolios of the nursing segment might make economic sense.

On the other hand, Swiss chemicals company Sika AG has moved to the downside despite raising its outlook for 2023 sales.

German lender Commerzbank has also tumbled despite backing its full-year profit view and lifting net interest income forecast.

Outsourcing giant Capita has also plunged after it swung to a half-year loss, while advertising group WPP has plummeted after downgrading its full-year growth forecast.

U.S. Economic Reports

Employment in the U.S. increased by less than expected in the month of July, according to a closely watched report released by the Labor Department on Friday.

The report said non-farm payroll employment climbed by 187,000 jobs in July after rising by a downwardly revised by 185,000 jobs in June.

Economists had expected employment to jump by 200,000 jobs compared to the addition of 209,000 jobs originally reported for the previous month.

Meanwhile, the Labor Department said the unemployment rate edged down to 3.5 percent in July from 3.6 percent in June. Economists had expected the unemployment rate to remain unchanged.

Stocks In Focus

Shares of Tupperware (TUP) are skyrocketing in pre-market trading after the consumer products company announced an agreement with its lenders to restructure its existing debt obligations, reducing or reallocating approximately $150 million of cash interest and fees.

Online gambling company DraftKings (DKNG) is also seeing significant pre-market strength after reporting a narrower than expected second quarter loss on revenues that exceeded analyst estimates.

Meanwhile, shares of Fortinent (FTNT) are moving sharply lower in pre-market trading after the cybersecurity company reported better than expected second quarter earnings but provided disappointing revenue guidance for the current quarter.

Online home selling company Opendoor Technologies (OPEN) may also come under pressure after reporting a narrower than second quarter loss but forecasting third quarter revenue below analyst estimates.