U.S. stock-index futures traded little changed Friday as investors looked ahead to highly anticipated data on the labor market, which could also provide insight into inflation—a primary focus for Wall Street amid a search in government bond yields.
Where are the major benchmarks trading?
Futures for the Dow Jones Industrial Average YMU9, -0.93% edged 5 points higher to 26,656. S&P-500 futures ESU9, -0.83% were down by a little over a point to 2,906.50. Nasdaq-100 futures NQU9, +0.17% shed 12.25 points, or 0.2%, to 7,502.25.
U.S. equity markets are coming off one of the worst days in months. The Dow DJIA, -0.75% suffered its biggest one-day percentage drop since August on Thursday, while both the S&P SPX, -0.82% and the Nasdaq COMP, -1.81% logged the biggest daily drop since late June.
For the week, the S&P is looking at a drop of 0.4%, its second straight weekly decline. The Nasdaq is down 2.1%. The Dow, however, remains in positive territory, and is up 0.6% on the week. The blue-chip average has risen in five of the past six sessions, and it ended at a record as recently as Wednesday.
Thursday’s losses came as the yield on government bonds extended a rapid climb to the highest level since 2011, forcing a broad reassessment of assets that are seen as risky, like stocks.
What’s driving the market?
Yields continued to rise on Friday, with the U.S. 10-year Treasury note up 1 basis point to 3.20%. A month ago, the yield was around 2.88%.
Read: Bond King Jeff Gundlach says Treasury market is witnessing a ‘game-changer’
The rise in bond yields reflects growing perception that the economy continues to be strong, which pushed investors to dump bonds. That pushed yields higher, as bond yields and prices move inversely to each other.
While a strong economy creates a good environment for stocks, a higher yield can also damp enthusiasm for equities, as it offers higher returns for income-seeking investors, without the risk or volatility typically associated with equities. Higher yields could also mean that the Federal Reserve may have to be more aggressive in raising interest rates, which would be seen as another headwind for stock prices.
The key trading event for Wall Street on Friday will come with the 8:30 a.m. ET release of the September payroll report. Economists polled by MarketWatch expect 168,000 net jobs were added and hourly wages rose 0.3%, while the unemployment rate may fall a notch to 3.8%.
The report won’t only be scrutinized for what it says about the strength of the labor market—something recent data has been bullish about—but also for its insight into wage growth. If the report indicates that wages are growing quickly, that could underline the concerns that investors have about inflation in the market and spur additional selling.
See also: JPMorgan strategist urges investors to stay bullish even as stocks log worst day in months
What are market analysts saying?
“What has caught markets by surprise is not so much the strength of the job market and of the overall economy but the speed at which it is progressing,” said Fiona Cincotta, senior market analyst at City Index. “The high levels of employment has been feeding wage increases and fueling higher consumer spending, in turn leading to rising inflation. Now the speculation will start if the Federal Reserve will speed up its planned rate hikes this year and next thus giving bond markets more fuel for a further flare up in yields.”
What stocks are in focus?
Costco Wholesale Corp. COST, -0.65% late Thursday said it was assessing its internal control over its financial reporting.
Snap Inc. SNAP, -5.22% could rise a day after a memo from the chief executive set a goal of profitability for the full year of 2019. The stock has struggled throughout 2018, falling more than 46% thus far this year.
Precision Drilling Corp. PDS, -1.71% said it would merge with Trinidad Drilling in deal that values Trinidad at about $1.028 billion.
General Electric Co. GE, +1.44% late Thursday said its board approved an “employment inducement award” for Chief Executive Officer H. Lawrence Culp that is contingent upon how much the stock appreciates under Culp’s leadership.
Canadian-based cannabis company Tilray Inc. TLRY, -7.18% announced its pricing of $450 million in convertible debt late Thursday, valuing the company’s stock at a 15% premium. The stock has been a trading favorite of late, and while the shares have been extremely volatile, it is up 62% over the past month.
Where are the other markets trading?
Shares in Asia were mostly lower, with weakness in technology stocks dragging down the major indexes. Major European indexes were also lower, extending their recent weakness.
Crude-oil CLK9, +0.09% prices rose 0.3% while gold GCM9, +0.37% was also up 0.3%. The U.S. dollar index DXY, +0.08% gained 0.1%.
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