US Stocks and Treasuries Steady Ahead of Jobs Data: Markets Wrap

(Bloomberg) — US stocks and Treasuries held steady as traders waited to see whether Friday’s payrolls report will offer the Federal Reserve enough justification to hold off on an interest-rate hike in September.

S&P 500 futures barely budged. Nasdaq 100 contracts rallied 0.5%, with chip stocks outperforming in early trading. Treasuries and the dollar were little changed. Brent crude eased toward $95 a barrel. Bitcoin fell, but still headed for a third straight week of gains.

The jobs report for August arrives at a time when the odds of a quarter-point Fed hike this month are roughly even. While Fed Chair Kevin Warsh last week emphasized that policymakers’ focus is firmly on inflation, the employment report could help buy them time to assess whether current policy is restrictive enough to bring price pressures under control.

Economists estimate the report will show a 55,000 increase in payrolls after an unexpected dip in July employment. Such a result would be broadly in line with average job growth this year. The unemployment rate is seen holding at 4.1%.

“The market needs a result weak enough to give the Fed a reason to keep interest rates unchanged, but not so weak that it intensifies concerns about a recession,” noted Linh Tran at XS.com. “Stronger-than-expected employment and wage growth could push yields higher again and weigh on equities.”

By contrast, figures close to expectations and accompanied by moderating wage growth would create favorable conditions for the S&P 500 to retest its record high, Tran said.

Bloomberg Economics’ Anna Wong expects the payrolls number to undershoot consensus, citing a pattern of the data disappointing in August. JPMorgan’s Market Intelligence desk sees a Goldilocks scenario in the 30,000-to-70,000 range.

“We are in the territory where bad news is good news, as both equities and credit are likely to be driven by what rates do,” said Mohit Kumar at Jefferies. “A small positive number would be a sweet spot for the markets.”

Europe’s Stoxx 600 edged higher 0.1%. Volkswagen AG rose as much as 9.7% after a major restructuring announcement. The region’s bonds underperformed.

In Japan, the yen held most of its gains after advancing more than 2% on Thursday. The currency has strengthened this week to around 156 amid growing expectations that the Bank of Japan will tighten monetary policy faster than previously thought.

BOJ policymakers could raise rates at three consecutive meetings through December in an extreme scenario where yen weakness persists, according to Nomura Securities Co. A quarter-point increase this month “looks reasonable,” while “it’s possible that we can have back-to-back rate hikes in October and December,” Yujiro Goto, head of FX strategy in Japan, told Bloomberg TV.

Corporate Highlights:

Norway’s sovereign wealth fund proposed reducing the amount of government bonds in its $2.3 trillion portfolio to boost holdings of riskier debt, with Treasuries the most affected. Lululemon Athletica Inc. tumbled in premarket trading after lowering its full-year outlook for a second straight quarter. Anthropic PBC is set to finalize an expansion of its revolving credit facility to $15 billion, according to people familiar with the matter. OpenAI is releasing a new generation of its technology called GPT-6 that the company is positioning as a key milestone in a push to build so-called artificial general intelligence. Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 7:38 a.m. New York time Nasdaq 100 futures rose 0.5% Futures on the Dow Jones Industrial Average were little changed The Stoxx Europe 600 rose 0.1% The MSCI World Index was little changed Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1621 The British pound was little changed at $1.3535 The Japanese yen fell 0.3% to 156.30 per dollar Cryptocurrencies

Bitcoin fell 0.2% to $81,304.95 Ether rose 0.8% to $2,526.1 Bonds

The yield on 10-year Treasuries was little changed at 4.76% Germany’s 10-year yield was little changed at 3.35% Britain’s 10-year yield advanced one basis point to 5.15% Commodities

West Texas Intermediate crude fell 0.7% to $90.69 a barrel Spot gold fell 0.1% to $4,467.91 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Subrat Patnaik and Jan-Patrick Barnert.

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