Stock index futures indicated a lower opening on Thursday due to increased focus on the labor sector ahead of the significant Friday jobs data.
The US jobs report is still the crucial data point that will have the biggest impact on this week’s outcome, but that hasn’t stopped markets from increasing their estimate for a 50bp Fed hike yesterday. After Fed Chair Powell hinted at the possibility of picking up the pace of hikes once more in his testimony, the markets will need to see tangible proof from Friday’s report before they can turn around.
When Fed Chair Powell conveyed a little milder message on the timing of upcoming rate hikes during the past 24 hours, markets began to show indications of stabilization.
Powell was trying to guide us away from a particular outcome, but the choice was always going to be heavily influenced by Tuesday’s CPI data and tomorrow’s jobs report. Regardless of what Powell may have said, markets continued to reflect a rising likelihood that the Fed will choose for a 50bps hike at the next meeting.
On the short end, rates somewhat decreased. The yield on the 10-year Treasury (US10Y) increased by 1 basis point to 3.99%. The US2Y, or 2-year yield, decreased 3 basis points to 5.03%.
In terms of payrolls, the American market is in control. The back end is struggling to rise above 4% even if the front end has pushed higher, further inverting the curve. That is not to mean that investors are clamoring to select the yields on 10Y US Treasury bonds that are close to 4%. In sharp contrast to the outstanding outcomes of other bond sales this year, yesterday’s 10Y auction revealed some concern ahead of the payrolls and also next week’s crucial CPI report.
Prior to the bell, weekly initial unemployment claims data is released. Analysts anticipate a little increase to 195K.
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