Futures Pointing To Mixed Open On Wall Street After Strong Jobs Data

The major U.S. index futures are currently pointing to a mixed open on Friday following the release of the closely watched monthly jobs report.

The mixed performance by the futures comes after the Labor Department released a report showing stronger than expected job growth in the month of July.

The Labor Department said non-farm payroll employment spiked by 943,000 jobs in July after surging by an upwardly revised 938,000 jobs in June.

Economists had expected employment to jump by 870,000 jobs compared to the addition of 850,000 jobs originally reported for the previous month.

The stronger than expected job growth was partly due to sharp increases in employment in leisure and hospitality and local government education, which shot up by 380,000 jobs and 221,000 jobs, respectively.

Reflecting the strong job growth, the unemployment rate slid to 5.4 percent in July from 5.9 percent in June, falling to its lowest level since March of 2020. Economists had expected the unemployment rate to dip to 5.7 percent.

The data may help alleviate recent concerns about a slowdown in the pace of the economic recovery but could also lead to worries about the outlook for monetary policy.

Last week, Federal Reserve Chair Jerome Powell indicated further progress was needed in labor market recovery before the central would consider scaling back stimulus.

“We had thought that continued slow progress on the employment recovery would see the Fed hold off tapering its asset purchases until early next year,” said Andrew Hunter, Senior U.S. Economist at Capital Economics.

He continued, “But with Board members Richard Clarida and Christopher Waller both recently suggesting a run of stronger jobs growth would be enough to meet the threshold of ‘substantial further progress,’ the risks may now be titled towards that process beginning sooner than we had expected.”

After ending the Wednesday’s trading mostly lower, stocks moved back to the upside during trading on Thursday. With the upward move on the day, the Nasdaq and the S&P 500 reached new record closing highs.

The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow climbed 271.58 points or 0.8 percent to 35,064.25, the Nasdaq advanced 114.58 points or 0.8 percent to 14,895.12 and the S&P 500 rose 26.44 points or 0.6 percent to 4,429.10.

The strength on Wall Street came following the release of a report from the Labor Department showing a modest decrease in first-time claims for U.S. unemployment benefits in the week ended July 31st.

The report said initial jobless claims slipped to 385,000, a decrease of 14,000 from the previous week’s revised level of 399,000.

Economists had expected jobless claims to dip to 384,000 from the 400,000 originally reported for the previous week.

Chris Low, Chief Economist at FHN Financial, said the total number of unemployment recipients fell by 1.5 million between the June and July surveys, suggesting a “hefty” increase in employment in the Labor Department’s closely watched monthly jobs report.

Meanwhile, a separate report from the Commerce Department showed the U.S. trade deficit widened by more than expected in the month of June, reaching a new record high.

The Commerce Department said the trade deficit widened to $75.7 billion in June from a revised $71.0 billion in May.

Economists had expected the trade deficit to widen to $74.1 billion from the $71.2 billion originally reported for the previous month.

The wider than expected trade deficit came as the value of imports jumped by 2.1 percent to $283.4 billion, while the value of exports rose by 0.6 percent to $207.7 billion.

Airline stocks showed a substantial rebound on the day, with the NYSE Arca Airline Index soaring by 4.3 percent following a 2.4 percent nosedive on Wednesday.

Significant strength also emerged among brokerage stocks, driving the NYSE Arca Broker/Dealer Index up by 2.6 percent to its best closing level in well over a month.

Energy stocks also turned in a strong performance, bouncing back along with the price of crude oil.

Reflecting the strength in the energy sector, the NYSE Arca Oil Index and the Philadelphia Oil Service Index climbed by 1.8 percent and 1.7 percent, respectively.

Banking, utilities and computer hardware stocks also saw notable strength on the day, while gold and steel stocks bucked the upward trend.

Commodity, Currency Markets

Crude oil futures are ¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬climbing $0.88 to $69.97 a barrel after advancing $0.94 to $69.09 a barrel on Thursday. Meanwhile, after slipping $5.60 to $1,808.90 an ounce in the previous session, gold futures are falling $16.60 to $1,792.30 an ounce.

On the currency front, the U.S. dollar is trading at 110.07 yen versus the 109.77 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1784 compared to yesterday’s $1.1834.

Asia

Asian stocks ended mixed on Friday despite broadly positive cues from Wall Street overnight. Focus shifted to key U.S. jobs data due later in the day after Fed Vice Chair Richard Clarida said conditions for an interest rate hike could be met in late 2022.

Chinese shares ended a tad lower amid virus and regulatory woes. The benchmark Shanghai Composite Index dipped 8.32 points, or 0.2 percent, to 3,458.23, while Hong Kong’s Hang Seng Index ended marginally lower at 26, 179.40.

Japanese shares eked out modest gains as the country expanded COVID-19 curbs to more than 70 percent of its population. The Nikkei 225 Index inched up 91.92 points, or 0.3 percent, to 27,820.04, while the broader Topix finished marginally higher at 1,929.34.

Konami Holdings, Nikon and Fujikura jumped 7-16 percent, while Kawasaki Kisen Kaisha, Sumco, Sharp Corp and Kobe Steel lost 4-10 percent.

In economic news, average household spending in Japan was down 5.1 percent year-on-year in June, the Ministry of Internal Affairs and Communications said, coming in at 260,285 yen. That was well shy of expectations for an increase of 0.1 percent and down sharply from the 11.6 percent spike in May.

Australian markets fluctuated before ending at a record high as RBA Governor Philip Lowe signaled a willingness to respond if the Covid-19 situation worsens.

The benchmark S&P/ASX 200 Index rose 27.30 points, or 0.4 percent, to 7,538.40, while the broader All Ordinaries Index ended up 26.90 points, or 0.4 percent, at 7,806.50.

BHP lost 2 percent as its board approved $544 million in capital spending to execute the Shenzi North oil project in the U.S. Gulf of Mexico.

Fortescue Metals Group, Mineral Resources and Rio Tinto fell between 1 percent and 1.6 percent as iron ore prices plunged over fears of further output restrictions at steel mills in China.

Gold miners Evolution Mining, Regis Resources, Newcrest and Northern Star Resources lost 1-3 percent.

Seoul stocks fell for a second straight session as sentiment was dented on concerns about the spared of the new Covid-19 variant. The benchmark Kospi dipped 5.77 points, or 0.2 percent, to 3,270.36. SK Hynix and LG Chem both fell about 1.7 percent.

Europe

European stocks have struggled for direction on Friday, with nervousness over the spread of the Delta variant of the coronavirus and uncertainty about government policy in China keeping underlying sentiment cautious.

Investors have shrugged off data showing that Germany’s industrial production unexpectedly declined in June.

German industrial output dropped 1.3 percent in June from May, when production was down by revised 0.8 percent, Destatis reported. Economists had forecast production to grow 0.5 percent in June.

Year-on-year, industrial output grew 5.1 percent, but slower than the 16.6 percent increase seen in May.

While the French CAC 40 Index has climbed by 0.5 percent, the German DAX Index is up by 0.2 percent and the U.K.’s FTSE 100 Index is up by 0.1 percent.

ING shares have advanced. The Dutch lender beat expectations for second-quarter profit after releasing money set aside for doubtful loans.

Italian lender Banco BPM has also shown a strong move to the upside after it swung to a profit in the second quarter.

London Stock Exchange Group has also moved sharply higher after it reported a 4.6 percent rise in revenue for the first half of 2021.

BPO company Capita has also risen after delivering half-year results in line with expectations.

Insurer Allianz has also rallied after it posted better-than-expected second-quarter earnings and issued a rosier outlook for the full year.

On the other hand, Hikma Pharma has slumped despite the company reporting higher first-half revenue and profits.

Meal-kit delivery company HelloFresh has also tumbled after lowering its 2021 profitability forecast.

U.S. Economic Reports

A closely watched report released by the Labor Department on Friday showed U.S. employment soared by more than expected in the month of July.

The Labor Department said non-farm payroll employment spiked by 943,000 jobs in July after surging by an upwardly revised 938,000 jobs in June.

Economists had expected employment to jump by 870,000 jobs compared to the addition of 850,000 jobs originally reported for the previous month.

The stronger than expected job growth was partly due to sharp increases in employment in leisure and hospitality and local government education, which shot up by 380,000 jobs and 221,000 jobs, respectively.

Reflecting the strong job growth, the unemployment rate slid to 5.4 percent in July from 5.9 percent in June, falling to its lowest level since March of 2020. Economists had expected the unemployment rate to dip to 5.7 percent.

The bigger than expected decrease in the unemployment rate came as household employment skyrocketed by 1.043 million persons, while the labor force rose by 261,000 persons.

The report also said average hourly employee earnings rose by $0.11 or 0.4 percent to $30.54 in July. Annual wage growth accelerated to 4.0 percent in July from 3.7 percent in June.

At 10 am ET, the Commerce Department is scheduled to release its report on wholesale inventories in the month of June. Wholesale inventories are expected to climb by 0.8 percent.

The Federal Reserve is due to release its report on consumer credit in the month of June at 3 pm ET. Economists expect consumer credit to increase by $23.0 billion.

Stocks In Focus

Shares of Carvana (CVNA) are moving sharply higher in pre-market trading after the online user card retailer unexpectedly reported its first-ever quarterly profit on better than expected revenues.

Sports betting company DraftKings (DKNG) is also likely to see initial strength after reporting second quarter results that exceeded analyst estimates and raising its full-year revenue guidance.

On the other hand, shares of Zynga (ZNGA) may come under pressure after the mobile gaming company reported weaker than expected second quarter results and provided a disappointing full-year forecast.

Drugmaker Novavax (NVAX) is also seeing considerable pre-market weakness after reporting a wider than expected second quarter loss and delayed its timeline for seeking FDA approval for its Covid-19 vaccine.