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Traders on the floor of the NYSE, July 6, 2023.
Source: NYSE
Stock futures were little changed Thursday evening, as investors refocused their attention on the upcoming June payrolls report and the implications for the Federal Reserve’s policy stance.
Futures tied to the Dow Jones Industrial Average and S&P 500 futures hovered near the flat line. Nasdaq 100 futures slipped by 0.04%.
Private sector employers added 497,000 jobs in June, according to Thursday data from ADP. That figure far exceeded the 220,000 estimate from economists polled by Dow Jones.
The ADP results spurred worries about the Fed’s next steps. Bond yields spiked during regular trading Thursday, with the rate on the 2-year Treasury — which is most sensitive to the central bank’s policy —touching its highest level since 2007. Stocks also fell, as the 30-stock Dow shed more than 1%. The S&P 500 and the Nasdaq Composite slid about 0.8% each.
This week’s main event for economic data looms ahead: the Labor Department’s June payrolls report, which is due Friday morning. Economists polled by Dow Jones anticipate an increase of 240,000 positions, a cooldown from May’s gain of 339,000 jobs.
Thursday’s data put investors on high alert for signs that further policy tightening is ahead for the central bank. Traders now forecast a 91% chance the Fed will raise rates at its July meeting, according to the FedWatch tool from CME Group. Policymakers indicated at their June gathering that two more rate hikes could be ahead in 2023.
“The Fed is signaling a willingness to keep tightening, but markets aren’t convinced it will happen as much as the Fed projects,” Kathy Jones, chief fixed income strategist for the Schwab Center for Financial Research, wrote in a bond market update. “The gap between the peak rate implied by the dot plot and market expectations has narrowed but hasn’t closed.”
The three major averages are on their way to a losing week. The S&P 500 is off by about 0.9%, while the Nasdaq is on pace for a 0.8% decline. The Dow is the underperformer of the three, tracking for a 1.4% loss.
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