BLBG: Drop in U.S. Stock Futures Signals Anxiety Over Payrolls Report
`Everyone is following the U.S. economy even closer' now
Jobs report is last major data point before Fed meeting
U.S. equity futures signal stocks are poised to reverse two days of gains as investors await today’s jobs report, the last major data point before the Federal Reserve meets later this month.
Contracts on the Standard & Poor’s 500 Index expiring in September lost 0.9 percent to 1,928.75, while futures on the Dow Jones Industrial Average fell 1 percent to 16,189.
“There is some hesitance ahead of the payrolls data this afternoon,” said Espen Furnes, who helps oversee $85 billion at Storebrand Asset Management in Oslo. “Clearly, stronger-than-anticipated unemployment data would indicate that the U.S. economy is robust enough for a rate hike now. These days, where investors are trying to grasp the influence and magnitude of a slowing Chinese economy, everyone is following the U.S. economy even closer as this is the main driver in the global economy going forward.”
Data due at 8:30 a.m. New York time is expected to show nonfarm payrolls increased by 217,000 in August from a July gain of 215,000, while the unemployment rate will probably decline to 5.2 percent. Traders are now pricing in a 28 percent chance that the Fed will act this month, down from 38 percent last week.
August tends to be a pocket of “payroll weakness” even in strong years for hiring, Deutsche Bank economists wrote in a note yesterday.
“If payrolls disappoint, market participants might question the Fed’s resolve,” they wrote.
U.S. stocks closed little changed yesterday, erasing a rally of nearly 200 points for the Dow as optimism over the European Central Bank’s revamp of quantitative easing faded. September is historically the worst month of the year for the S&P 500, with the equity gauge falling 1.1 percent on average based on data going back to 1927, according to data compiled by Bloomberg.
Caterpillar Inc. declined 1.3 percent in early New York trading after Robert W. Baird & Co. Inc. downgraded the construction-equipment company to neutral from outperform. Freeport-McMoRan Inc. slipped after the rating agency Standard & Poor’s cut its outlook to negative from stable.
Netflix Inc. added 3 percent, indicating the company may trim a 14 percent decline for the week. The stock has more than doubled this year.
