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Dow Futures Bounce Higher on Jobs Data: Ford Hits Six-Year High

The Federal Reserve's view that inflation pressures will ease over the second half of the year may be put to the test today if non-farm payrolls show a surge in post-pandemic hiring.

The Friday Market Minute

  • Global stocks edge lower ahead of today's May non-farm payroll report as inflation signals accelerate and pressure on the Fed's 'transitory' narrative continues to build.
  • U.S. employers likely added a net new 650,000 jobs to the economy last month, analysts estimate, with wages rising 0.2% and the headline unemployment rate falling to 5.9%
  • Benchmark 10-year note yields rise to 1.63% while the dollar index gains 0.1% to trade at 90.565 ahead of today's non-farm payroll data.
  • CDC data shows 136.6 million Americans have now been fully vaccinated against the coronavirus, with around 297.7 million doses administered as of Wednesday.
  • U.S. equity futures suggest a weaker open head of the May non-farm payroll report at 8:30 am Eastern time and a speech on the central bank's role in green investment from Fed Chair Jerome Powell at 7:00 am Eastern time.

Wall Street futures turned higher Friday, while the dollar eased and Treasury bond yields slipped lower, after a modestly weaker-than-expected reading of the Labor Department's May non-farm payroll report.

The Bureau for Labor Statistics said 559,000 new jobs were created last month, lead by gains in leisure and hospitality, with headline unemployment rate edging fell to 5.8% from 6.1%, while wages surged 2% from last year, compounding forecasts while underscoring the challenge employers face in brining workers back into the market over the final months of the pandemic.

Data from payroll processing group ADP showed private employers added a much larger-than-expected 978,000 new jobs last month while new claims for unemployment benefits fell to a new post-pandemic low of 385,000 for the week ending May 22.

Investors will also be closely tracking the increase in hourly wages amid concern that the record 8.1 million job openings has compelled employers to pay increasingly higher salaries to fill vacant positions. 

That dynamic, as well as a series of data releases from both the manufacturing and services sector of the economy showing input costs rising at the fastest pace in decades, has investors worried that headline inflation, currently running at 4.2%, will accelerate further into the summer months. 

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The direction of oil prices certainly adds to that theory, with WTI crude rising more than 4% this week to a 2018 high of $69.20 per barrel in overnight trading -- taking its year-to-date gain past 30% -- as traders see deeper demand from major economies around the world over the second half of the year.

Still, even with a plethora of figures cementing the case for near-term inflation spikes, benchmark 10-year Treasury bond yields -- a key metric for stock market direction -- have held near the 1.6% mark for much of the week. 

Stock futures turned higher following the data release, with contracts tied to the Dow Jones Industrial Average indicating a 105 point opening bell gain after earlier suggesting a 20 point pullback.

Contracts tied to the S&P 5500, which is up 12% for the year, are priced for a 17 bump while the Nasdaq, is set for a 70 point advance.

Early pre-market movers include Tesla  (TSLA) - Get Report, which gained just over 1% to change hands at $579.00 each following last night's report of a steep decline of vehicle sales in China, and Ford Motor Co.  (F) - Get Report, which extended its recent rally by another 3%, to $16.150per share -- the highest in more than six years --following yesterday's bullish first half outlook from rival General Motors  (GM) - Get Report and a price target boost to $18 from JPMorgan.

Lululemon  (LULU) - Get Report shares were also active, but slipped 0.4% even after the athletic apparel company posted stronger-than-expected first quarter earnings and forecast full-year profits firmly ahead of Wall Street forecasts. 

In other markets, European stocks were little-changed ahead of the U.S. jobs data, while stocks in Asia slipped lower, lead by a 0.4% decline for the Nikkei 225 in Tokyo amid renewed questions over the fate of the delayed Summer Olympics.