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U.S. futures dip, waiting for jobs report to adjust Fed rate hike odds

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Investing.com - Wall Street futures pointed to a slightly lower open on Friday as investors showed caution ahead of September's employment report and its potential impact on the timing of the Federal Reserve's (Fed) return to policy tightening.

The blue-chip Dow futures lost 43 points, or 0.24%, by 6:55AM ET (10:55GMT), the S&P 500 futures fell 7 points, or 0.32%, while the tech-heavy Nasdaq 100 futures traded down 15 points, or 0.31%.

Markets looked forward to the U.S. Labor Department's release of the September nonfarm payrolls (NFPs) report at 8:30AM ET (12:30GMT) on Friday.

The consensus forecast is that the data will show jobs growth of 170,000, following an increase of 151,000 in August, the unemployment rate is forecast to hold steady at 4.9%, while average hourly earnings are expected to rise 0.2% after gaining 0.1% a month earlier.

Investors will focus on not only job creation but movements in wages as the Fed is monitoring not just slack in the labor market but the corresponding impact that higher salaries could have on inflation.

An upbeat employment report will point to an improving economy and support the case for higher interest rates in the coming months, while a weak report would add to uncertainty over the economic outlook and push prospects of tighter monetary policy further off the table.

Most analysts dismiss the possibility of a November rate hike, citing the proximity of the U.S. presidential election. Markets currently price in the chance of an increase next month at just 14.5%, according to Investing.com's Fed Rate Monitor Tool .

Most bets pointed to a December move with the odds at 63.4%.

Several U.S. central bank officials will also be on the market's radar with Cleveland Fed president Loretta Mester, who dissented at the last meeting to her agreement with colleagues Boston and Kansas City Fed chiefs Eric Rosengren and Esther George that the Fed should hike rates by 25 basis points, reportedly scheduled to give an interview to CNBC following the jobs release.

At 10:30AM ET (14:30GMT), Fed vice chair Stanley Fischer will give a keynote speech at the annual meeting of the Institute of International Finance (IIF).

Mester will follow up her CNBC interview with a speech to the Shadow Open Market Committee at 12:45PM ET (16:45GMT).

George and Fed governor Lael Brainard will deliver separate speeches to the IIF at 3:00PM ET (19:00GMT) and 4:00PM ET (20:00GMT), respectively.

Apart from jobs report on the economic calendar, markets will also digest August wholesale inventories at 10:00AM ET (14:00GMT) and consumer credit for the same month at 3:00PM ET (19:00GMT).

No major companies were scheduled to release earnings. The third-quarter reporting period unofficially begins with Alcoa's results on October 11.

Elsewhere, market participants were eyeing a surprise flash crash in sterling. The pound fell more 6% in a drop that was suspected to be have driven by computer-initiated sell orders that left the currency on track for its worst week since the Brexit vote in June.

Thin trade exacerbated the fall and some analysts suggest the blame could lie with trading algorithms picking up on a stern stance on future negotiations taken by French President François Hollande over the U.K.'s decision to leave the European Union (EU), known as a Brexit.

"There must be a threat, there must be a risk, there must be a price," Hollande said.

The pound recovered from the initial crash but was still quoting solid losses for the day. At 6:57AM ET (10:57GMT), GBP/USD was down 1.91% at 1.2374.

Meanwhile, U.S. oil futures traded lower on Friday, but remained on track for weekly gains, hovering above the $50 a barrel threshold, as upbeat U.S. stockpiles data and sustained optimism following the OPEC production freeze deal continued to support the commodity.

Market participants also looked ahead for the latest weekly data from Baker Hughes. Last week, the oilfield services provider said that the number of rigs drilling for oil in the U.S. had risen by 7 to 425, marking the 13th increase in 14 weeks.

U.S. crude futures traded down 0.28% to $50.30 by 6:59AM ET (10:59GMT), while Brent oil fell 0.55% to $52.22.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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