Stocks Set To Open Lower As Strong U.S. Jobs Report Sparks Rate Hike Worries

March S&P 500 futures (ESH23) are trending down -0.94% this morning after three major U.S. benchmark indices closed in the red on Friday as a blowout jobs data sparked fears that the Federal Reserve would keep hiking interest rates. Three major U.S. stock indexes were weighed down primarily by losses in the Consumer Services, Utilities, and Basic Materials sectors. 

In Friday’s trading session, all three major U.S. stock indices retreated as consumer and technology stocks led the broader market lower, with Amazon.com (AMZN) closing down over -8% and Google parent Alphabet (GOOGL) closing down more than -2% after their disappointing quarterly results. 

Data on Friday showed the U.S. economy created 517K jobs last month, almost three times what was expected, indicating that U.S. employment remained strong despite cooling economic activity. Average hourly earnings stood at +4.4% y/y in January, down from the +4.8% y/y in December but were above estimates of +4.3% y/y. Also, the unemployment rate fell to a 53-year low of 3.4%. Other data showed the ISM services index rose to 55.2 in January, well above estimates of 50.4.

“While it is very helpful to see the jobs increasing, it is really a horse race between that ongoing income and how quickly inflation comes down. The Fed really is in a tough place trying to navigate between keeping those price pressures down and not causing too much economic pain,” said Lisa Erickson, a head of public markets group at U.S. Bank Wealth Management.

Earnings season shifts away from the big techs and now focuses on broader parts of the economy, with Walt Disney (DIS), New York Times (NYT), Uber (UBER), CVS Corp (CVS), PayPal (PYPL), AbbVie (ABBV), PepsiCo (PEP), and Kellogg (K) set to report results this week.

In the coming week, investors will be monitoring a spate of economic data, including the U.S. Exports, Imports, Trade Balance, Crude Oil Inventories, Initial Jobless Claims, Michigan Consumer Expectations (preliminary), Michigan Consumer Sentiment (preliminary), and Federal Budget Balance.

Also, market participants will be awaiting an appearance by Fed Chair Jerome Powell at the Economic Club of Washington on Tuesday. In addition, several other Fed officials will be making appearances this week, including Williams, Kashkari, and Bostic.

The U.S. economic data slate is mainly empty on Monday.

In the bond markets, United States 10-Year rates are at 3.610%, up +2.21%.

The Euro Stoxx 50 futures are down -1.13% this morning as market participants re-assessed the global economic outlook after stronger-than-expected U.S. Nonfarm Payrolls data. European stocks have received a negative handover from Wall Street and Asia after a better-than-expected U.S. jobs report dampened investor hopes that the Fed might ease off plans for more rate hikes. In corporate news, shares of Aurubis Ag (NDA.D.DX) fell over -5% after the continent’s largest copper producer reported an about 24% drop in quarterly earnings due to high energy prices and inflation.

Germany’s Factory Orders, U.K.’s Construction PMI, and Eurozone’s Retail Sales data were released today.

The German December Factory Orders stood at +3.2% m/m, stronger than expectations of +2.0% m/m.

U.K. January Construction PMI has been reported at 48.4, weaker than expectations of 49.6.

Eurozone December Retail Sales came in at -2.7% m/m and -2.8% y/y, weaker than expectations of -2.5% m/m and -2.7% y/y.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.76%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.67%.

China’s Shanghai Composite today closed lower after strong U.S. jobs data fueled fears of more interest rate hikes to bring inflation under control. Also, concerns over U.S.-China geopolitical tensions weighed on sentiment after the U.S. shot down a suspected Chinese surveillance balloon off the coast of South Carolina on Saturday. China protested the U.S. move and claimed the balloon was used for meteorological objectives and had accidentally lapsed into U.S. airspace.

At the same time, Japan’s Nikkei 225 Stock Index closed higher after a report said that Bank of Japan Deputy Governor Masayoshi Amamiya, a proponent of the BOJ’s super-easy monetary policy, would take over as head of the central bank. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 1.03% to 16.29.

Pre-Market U.S. Stock Movers

Catalent Inc (CTLT) climbed over +17% in pre-market trading after Bloomberg reported that life sciences company Danaher (DHR) expressed takeover interest in the company. 

C3 Ai Inc (AI) gained more than +4% in pre-market trading, extending Friday’s gains after DA Davidson initiated coverage of the stock with a buy rating and a $30 price target.

Tesla Inc (TSLA) rose about +1% in pre-market trading after the company raised prices of its best-selling vehicle, the Model Y, by $1,000 in the U.S. after the government relaxed tax credit terms.

Kiora Pharmaceuticals Inc (KPRX) dropped over -3% in pre-market trading after the company filed to sell 1.05M shares of common stock for holders. 

Datadog Inc (DDOG) fell about -3% in pre-market trading after KeyBanc downgraded the stock to sector weight from overweight.

PayPal Holdings Inc (PYPL) slid more than -2% in pre-market trading after Raymond James downgraded the stock to market perform from outperform.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - February 6th

Activision Blizzard (ATVI), Simon Property (SPG), IDEXX Labs (IDXX), Cummins (CMI), ON Semiconductor (ON), Astellas Pharma Inc (ALPMY), Tyson Foods (TSN), Sumitomo ADR (SSUMY), Orix (IX), Pinterest (PINS), Take-Two (TTWO), Cincinnati Financial (CINF), Skyworks (SWKS), UDR (UDR), Loews (L), Aecom Technology (ACM), ZoomInfo (ZI), CNA Financial (CNA), Neurocrine (NBIX), TFI Intl (TFII), Nov (NOV), Affiliated Managers (AMG), Timken (TKR), Power Integrations (POWI), Leggett&Platt (LEG), Fabrinet (FN), Aurubis ADR (AIAGY), Simpson Manufacturing (SSD), Rambus (RMBS), Diodes (DIOD), Enact Holdings (ACT), Arrowhead Pharma (ARWR), Bellring (BRBR), Skyline (SKY), Varonis Systems (VRNS), Genworth (GNW), Chegg Inc (CHGG), Energizer (ENR), Kennametal (KMT), Intapp (INTA), Kforce (KFRC), NAPCO (NSSC), Mesa Labs (MLAB), Alpha & Omega Semiconductor (AOSL), Amark Preci (AMRK), Bristow Inc (VTOL).

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