Stock index futures were turned higher Thursday after the latest Challenger report showed a surge in job cuts back to June levels.
Challenger said layoffs in August jumped back above 75K from nearly 24K in July. All the labor market data has been soft this week. The big payrolls report hits Friday.
The S&P 500 (SP500) notched its fourth-straight gain in the previous session. It hasn’t been up five days in a row in more than two month.
A “strong finish narrowed August’s stock loss to c.2%, with the dollar (DXY) stronger, oil (CL1:COM) flat, and bonds and bitcoin (BTC-USD) lower,” strategist Ben Laidler said. “This resilience is telling after August’s triple whammy of higher fixed income yields, oil prices, and China concerns, after a record-breaking first seven-month rally. Some of September’s weak seasonality fear may have been anticipated, and we remain positive markets.”
“US Treasury yields remain under downward pressure as 10Y yields are trying to get a foothold at around 4.1% – early last week they had hit a high at 4.35%,” ING said.
Expectations “of another rate hike from the Fed have continued to come down, and now stand beneath 50% for the first time since last week. So bad news on the economy is still being treated as good news (for now), since optimism about fewer rate hikes is outweighing the prospects of slower growth.”
Weekly jobless claims arrive before the bell following soft JOLTS and ADP numbers. Economists expect a rise to 235K.
At the same time, July personal income and spending figures hit. The forecast is for a 0.7% monthly rise in spending and a 0.3% gain in income.
That report comes with the Fed’s favorite inflation gauge, the core PCE price index. That’s seen rising 0.2%, with the annual rate rising to 3.3%.
“We see a decent chance of a 0.3% increase in the July core PCE deflator today, above the consensus, 0.2%,” Pantheon Macro said. “This would be an unwelcome development, as this will be the last personal income and spending report before the next Fed meeting, on September 19-to-20.”
“But we doubt that an upside surprise in the July core PCE will materially boost the chances of another rate hike, not least because it would be driven largely by a spike in the hugely volatile financial services component.”
“The spending numbers should be resilient,” UBS’ Paul Donovan said. “Middle-income families have job security, face an inflation rate significantly lower than reported (unless Floridian), and still have savings. This is not true for lower income groups, but economic data tends to be plutocratic.”
After the start of trading, the August Chicago PMI arrives. The consensus is for a rise to 44.1.
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