Dow Futures Lower After January Jobs Report Smashes Forecasts

Investors are focused on today's January payroll report, which is likely to show U.S. employers added 160,000 new jobs last month.
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The Friday Market Minute

  • Global stocks slip lower ahead of U.S. payroll report, while China confirms coronavirus cases have topped 31,000 and killed at least 620 people.
  • President Xi Jingping tells President Donald Trump that China is doing all it can to contain the virus, but domestic anger is growing after the death of a doctor in Wuhan who identified the danger but was threatened by police.
  • U.S. employers likely added 160,000 new jobs last month, a pace that trails the 2019 average of 179,000 and could slow further into the first months of the year.
  • Global investors plow cash back into equities, with U.S. stocks seeing inflows of $12.7 billion, the most in nearly two months, as Wall Street prints fresh record highs.
  • U.S. equity futures suggest modestly weaker open on Wall Street ahead of the January employment report at 8:30 am Eastern time and earnings from AbbVie before the start of trading.

U.S. equity futures traded lower Friday as investors reacted to a key reading of the domestic jobs market prior to the opening bell that will test Wall Street's week-long rally and offset lingering concerns over the coronavirus impact on the global economy.

U.S. employers added a much larger than expected 225,000 net new jobs last month, the Labor Department said, while making modest upward revisions to the December and November totals. 

Average hourly wages, however, rose 0.2% from last month and missed the Street consensus forecast of 0.3%. From a year ago, wages are 3.1% higher, the Labor Department said. Workforce participation also improved, to 63.4% -- the highest in seven years -- while headline unemployment rose to 3.6% from 3.5%

The real question for most market participants is whether the endurance of job additions will continue to persist throughout the remainder of the year. Last year’s average payroll additions were 175,000 per month and today’s data reiterates the need for labor as the current economic expansion continues," said Charlie Ripley, senior investment strategist for Allianz Investment Management. 

"Wage increases were stronger than December’s data with a 0.2% monthly gain and we suspect this will be a continuing theme throughout the year as employers attempt to attract workers within tight labor market conditions," he added. "Overall, the January employment report provided a clear indication we haven’t reached the end of the current economic cycle."

With investors eyeing details of the Labor Department's employment report, markets overnight in Asia and early morning in Europe were largely unchanged, even as concerns continue to grow over the pace of new coronavirus infections and China's ability to contain it.

President Xi Jinping held a telephone call with President Donald Trump to assure him of China's efforts, but the death of a young doctor in Whuan, who first identified the spread of the virus only to then be threatened by local police, as some observers concerned with the level of transparency of the information coming from Beijing.

"He (Xi) will be successful, especially as the weather starts to warm & the virus hopefully becomes weaker, and then gone," Trump said. "Great discipline is taking place in China, as President Xi strongly leads what will be a very successful operation. We are working closely with China to help!"

That said, even with the death toll from the coronavirus rising to 640, infections passing the 31,000 mark, and analysts' forecast a 2 percentage point reduction in China GDP, global investors continue to pile into U.S. stock.

BofA data published Friday suggest U.S. equity inflows topped $12.7 billion over the week ending February 5, the best in nearly two months, with net new cash into world stocks rising to $14.3 billion.

U.S. equity futures, meanwhile, looked modestly weaker heading into the payroll report, with contracts tied to the Dow Jones Industrial Average marked for a 135 point pullback from last night's record high close of 29,379.77 points while those linked to the S&P 500 are indicating a 12.6 point retreat. 

Uber Technologies (UBER) - Get Report shares surged to a six-month high in pre-market trading after the group said it would start being profitable by the end of 2020, a year ahead of its prior forecast, as it focuses on premium rides and better returns from its food delivery business.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was 0.12% firmer at 98.63, extending its five-day gain past 1.1%, while benchmark 10-year Treasury bond yields rallied to 1.595%.

European stocks slipped lower at the start of trading Friday, after hitting an all-time peak earlier this week, with the Stoxx 600 falling 0.38% off the back of weaker basic resource and auto stocks. Britain's FTSE 100 traded 0.66% in London.

Credit Suisse Group (CS) - Get Report shares were a notable decliner in Europe following the shock resignation of CEO Tidjane Thiam, who abruptly left the Swiss lender following a spying scandal and a boardroom struggle with chairman Urs Rohner.

Overnight in Asia, however, stocks were weaker across the board as investors cashed out of a volatile week for regional equities amid the drumbeat of negative headlines linked to China's coronavrius epidemic. 

The region-wide MSCI ex-Japan benchmark was seen 0.67% lowering heading into the close of the session, while the Nikkei 225 in Tokyo closed 0.2% lower to end the week at 23,827.98 points.

Global oil prices were also struggling to hold gains in the early European session, with a series of increases in U.S. inventories, as well as ongoing questions of China demand, offsetting reports that Russia will back an OPEC+  proposal to deepen its production cut agreement by 600,000 barrels per day when cartel officials and non-member allies meet next month in Vienna.

Brent crude futures contracts for April delivery, the global benchmark for pricing, were last see seen 5 cents lower from their Thursday close in New York and trading at $54.88 per barrel, while WTI contracts for the same month were seen 11 cents lower at $50.84 per barrel.