Stock futures steady as jobs data stokes rate bets; ADP employment report returns ahead of Friday payrolls; Gasoline futures fall to pre-Russia/Ukraine levels; HP stock slides on weak pc market outlook and Snap tumbles after key ad execs decamp to Netflix.
Here are five things you must know for Wednesday, August 31:
1. — Stock Futures Steady As Jobs Data Stokes Rate Bets
U.S. equity futures were little-changed Wednesday, while the dollar held gains against its global peers and Treasury yields remained elevated, as investors worry that surprising solid jobs data will keep the Fed on its rate hike path heading into the back half of the year.
Yesterday’s Job Openings and Labor Turnover Survey from the Labor Department, known in the market as JOLTs, showed that nearly 11.24 million positions went unfilled last month, or nearly two for every unemployed person in the country.
The reading, as well as an upward revision for June, added further pressure on rate hike bets as investors factored-in the potential for higher wages, needed to tempt Americans back into the workforce, to continue to stoke inflation.
The CME Group’s FedWatch is now indicating a 70.5% chance of a 75 basis point rate hike next month in Washington, adding to the hawkish rhetoric from Fed Chair Jerome Powell last week in Jackson Hole.
U.S. consumer confidence also rose sharply in August, according to the Conference Board’s closely-tracked survey, amid an improving jobs market and falling gas prices.
The contrast with growth prospects in other economies, particularly China, is also adding upward momentum to the dollar, which gained 0.12% in overnight trading against a basket of its global peers to trade at 108.299.
Economic activity in China, in fact, slowed notably this month, according to official PMI published Wednesday, as both Beijing’s Covid lockdown rules, as well as some of the hottest weather on record, pushed the country’s manufacturing sector into contraction.
The data pulled China stocks into the red again Tuesday, while the Nikkei 225 fell 0.52% in Tokyo following last night’s sell-off on Wall Street.
In Europe, stocks were 0.24% lower ahead of August inflation data amid a big jump in rate hike expectations from the European Central Bank, which meets on September 8 in Frankfurt.
On Wall Street, futures tied to the S&P 500 are indicating a modest 3 point opening bell gain while those liked to the Dow Jones Industrial Average are priced for a 21 point move to the upside ahead of ADP jobs data at 8:15 am Eastern time. Futures linked to the tech-focused Nasdaq are indicating a 37 point advance.
2. — ADP Employment Report Returns Ahead of Friday Payrolls
Jobs data will likely hold the market’s attention for the next three trading days, with ADP’s National Employment report for the month of August expected before the start of trading.
The payroll processing group is expected to show U.S. employers added 200,000 private sector jobs over the month of August, with the report reflecting a new methodology that ADP says will provide a “more robust, high-frequency view of the labor market and trajectory of economic growth.”
The reading will form a key part of this week’s data releases centered around the jobs markets, particularly following yesterday’s July JOLTs update which showed a big jump in overall vacancies, which were pegged at 11.239 million, adding to concerns that faster-than-expected wage increases will be needed to tempt Americans back into employment.
The 8:15 am ADP release will be following by weekly jobless claims on Thursday and Friday’s August non-farm payroll report, which is expected to show 285,000 new hires, down from the red-hot tally of 528,000 in July.
3. — Gasoline Futures Fall To Pre-Russia/Ukraine Levels
U.S. gasoline futures slumped back to levels last seen prior to Russia’s invasion of Ukraine in overnight trading Wednesday, setting up further pump price declines heading into the Labor Day weekend.
Gasoline futures for September delivery were marked 6 cents lower in European trading at $2.633 per gallon after settling last night at $2.6944, the lowest since February 18.
Weak manufacturing data from China, the world’s biggest energy importer, is also pressuring global crude prices, with WTI futures for October marked $1 lower at $90.64 per barrel.
The AAA motor club indicates the national average for gas prices has fallen for 11 consecutive weeks to $2.841 per gallon, amid a ramp-up in U.S. drilling and the quietest tropical storm season in the Gulf of Mexico region since 1995.
4. — HP Stock Slides On Weak PC Market Outlook
HP (HPQ) – Get HP Inc. Report shares moved sharply lower in pre-market trading after the PC and peripherals maker posted weaker-than-expected second quarter earnings and a disappointing near-term profit outlook.
HP said a slump in consumer demand pulled revenues 4.1% lower from last year to an overall tally of $4.7 billion, missing the Street consensus forecast by around $1 billion. HP, which was added to Warren Buffett’s Berkshire Hathaway portfolio earlier this year, said adjusted profits for the current quarter would come in between 79 cents and 89 cents per share, well shy of analysts’ estimates of a $1.06 per tally.
Last week, Dell Technologies (DELL) – Get Dell Technologies Inc. Class C Report also cautioned that weakening business and consumer demand would clip near-term sales, even after it posted record second quarter revenues of $26.43 billion. .
HP shares were marked 5.95% in pre-market trading to indicate an opening bell price of $29.25 each.
5. — Snap Tumbles After Key Ad Execs Decamp to Netflix
Snap Inc (SNAP) – Get Snap Inc. Class A Report shares slumped lower in pre-market trading after the messaging app maker lost two of its key ad executives to streaming giant Netflix (NFLX) – Get Netflix Inc. Report.
Snap’s chief business officer, Jeremi Gorman, as well as its vice president of ad sales, Peter Naylor, will join Netflix as it ramps-up its ad-based offering following the biggest half-year subscriber decline in the streaming group’s history.
The departures are likely to add further pressure to Snap’s near-term ad sales outlook, which the Snapchat app maker said late last month would continue to suffer the impact of broader macro slowdown and Apple Inc.’s (AAPL) – Get Apple Inc. Report privacy changes, which prevent user tracking.
The late July warning trimmed hundreds of millions in value from social media stocks, including big tech giants Google (GOOGL) – Get Alphabet Inc. Report and Meta Platforms (META) – Get Meta Platforms Inc. Report, while reminding investors of the challenges that continue to face most companies over the second half of the year as supply chains remain tangled, input costs continue to surge and demand begin to wane.
Snap shares were marked 6.2% lower in pre-market trading to indicate an opening bell price of $9.39 each.