Stock index futures were little changed Friday as traders braced for a very short window to react to the March employment report.
Wall Street will be closed for regular stock trading for Good Friday, along with major bourses in Europe. But since that is not a U.S. federal holiday, payrolls will hit at 8:30 AM ET as usual.
S&P futures (SPX) -0.1%, Dow futures (INDU) -0.1% and Nasdaq futures (NDX:IND) –0.1% were off slightly.
Stock index futures on the CME will trade until 9:15 AM ET, giving investors 45 minutes to react to a very important jobs report after a week of data (JOLTS, ADP, claims) showing a weakening of the labor market.
This jobs report and the upcoming March CPI will have a big influence on a Fed the market says could go either way in its May meeting. Fed funds futures pricing in the slightest of edges of a hike of 25 basis points at 51% vs. a 49% chance of no move.
The “Fed has forecast a trough-to-peak increase in the US unemployment rate of roughly 1.0% in 2023,” James A. Kostohryz, leader of the Successful Portfolio Strategy Investing Group, wrote. “So far, virtually none of the softening in the labor market that the Fed has hoped to see has actually occurred thus far.”
“Unless the numbers in the March report show substantial weakness, the Fed will remain under considerable pressure to continue raising the federal funds interest rate.”
Bond market trading will also be curtailed with a recommended closing at noon ET (it would normally be closed were it not for today’s data).
The 10-year Treasury yield (US10Y) rose 1 basis point to 3.30% and the 2-year yield (US2Y) rose 1 basis point to 3.83%.
For the jobs report, forecasts have trended down this week and the consensus for a rise in nonfarm payrolls of about 215K, down from around 240K on Thursday. The unemployment rate is expected to hold at 3.6%.
“Both the Homebase data and the NFIB survey point to a 250K payroll print for March,” Pantheon Macro’s Ian Shepherdson said. “But rising jobless claims and falling hiring intentions point to much weaker numbers in Q2.”
“A 250K print would be too high for the Fed,” he said. “FOMC members continue to worry that such rapid job growth will push the unemployment rate to new lows and/or prevent wage inflation from slowing to a pace consistent with the inflation target. We would counter by pointing out that wage growth has slowed markedly since its peak in late 2021 even though the unemployment rate has returned to the pre-Covid low.”
The S&P 500 (SP500) snapped a three-week winning streak in this holiday-shortened week.