U.S. stock futures reversed course and pointed to a slightly lower open Friday morning after a key U.S. employment report showed slower-than-expected job growth in December amid the surging omicron variant of Covid 19.
Futures contracts tied to the Dow Jones Industrial Average are indicating a 34-point opening drop, while those linked to the S&P 500 are priced for a 7.5-point decline. Futures tied to the tech-focused Nasdaq Composite are indicating a 75.5-point drop at the start of trading as benchmark 10-year Treasury note yields trading up slightly at 1.762%.
The yield on the 10-year U.S. Treasury hit 1.75% on Thursday, sharply higher than last week’s 1.51% level. The move higher has hit growth-oriented areas of the market, since inflation eats into expectations of future profits. The tech-heavy Nasdaq is on track for its worst week since February 2021 as investors rotate out of growth and into value names.
Indeed, stocks finished lower on Thursday amid expectations that the Federal Reserve would pull back on economic stimulus sooner than expected to tamp down inflation.
Investors have been recalibrating their expectations of how inflation, which is currently running well above the Fed’s 2% annual target, will be tamped down by the Fed, and what that will mean to companies that have relied on low interest rates through the pandemic.
The nonfarm payrolls report showed the U.S. economy added far fewer jobs in December than expected. The Labor Department Friday reported payrolls increased by 199,000 in December, well below the 422,000 new jobs expected by economists polled by FactSet.
Average hourly earnings increased by 0.6%, above expectations, while the unemployment rate fell to 3.9%, the lowest level since Feb 2020 and also below the 4.1% expected by economists.
At the same time, some economists including Rosenberg Research founder and chief strategist David Rosenberg believe market-watchers aren’t looking at all the right numbers, given the soft November read on job openings, which plunged by 529,000, down in three of the past four months and the biggest slump since April 2020.
“The front pages are all about soaring 'quits' but nothing on sagging 'job openings,' Rosenberg said in a client note this week.
Global benchmark Brent crude was up 0.7% at $82.54 a barrel, its highest level in more than eight weeks amid expectations that oil supply could potentially be lower due to freezing conditions in the midwest and Canada, and if protests in oil-rich Kazakhstan continue.
Relatedly, shares of oil producers including Devon Energy (DVN) - Get Devon Energy Corporation Report, Marathon Oil (MRO) - Get Marathon Oil Corporation Report and Occidental Petroleum (OXY) - Get Occidental Petroleum Corporation Report were among the biggest movers in premarket trading Friday. Devon was up 1.5%, Marathon was up 1.44% and Occidental was up 1.37%.
GameStop (GME) - Get GameStop Corp. Class A Report shares continued to trade higher in premarket trading Friday after a report that the game retailer is launching a division to develop a marketplace for nonfungible tokens, or NFTs, making a foray into the world of cryptocurrencies and blockchain.
Other stocks in the spotlight Friday included Starbucks (SBUX) - Get Starbucks Corporation Report, whose shares were down nearly 2% after both RBC and Oppenheimer downgraded the coffee chain giant on expectations that profits may have reached their peak. Discovery (DISCA) - Get Discovery, Inc. Class A Report shares also traded higher after Bank of America upgraded the company, saying that it should gain as benefits with AT&T-owned (T) - Get AT&T Inc. Report Warner Media become clearer.