🚀 AI-picked stocks soar in May. PRFT is +55%—in just 16 days! Don’t miss June’s top picks.Unlock full list

U.S. stock futures extend declines after higher-than-expected labor market data

Published 02/03/2023, 06:35 AM
Updated 02/03/2023, 06:38 AM
© Reuters

By Scott Kanowsky

Investing.com -- U.S. stock futures fell on Friday, extending earlier declines, as investors examined a U.S. labor market report that remained surprisingly strong despite ongoing efforts by the Federal Reserve to tamp down demand.

At 09:12 ET (14:12 GMT), S&P 500 futures traded 50 points or 1.20% lower, and tech-heavy Nasdaq 100 futures shed 249 points or 1.94%. The Dow futures contract also dropped by 214 points or 0.63%.

The Labor Department said nonfarm payrolls grew by 517,000 through the middle of January, abruptly snapping a four-month trend of slowing job gains. Analysts had expected a further slowdown to 185,000, which would have been the slowest job growth in nearly two years.

December's payroll data were also revised up by 37,000 and November's by 34,000, reinforcing the unexpected nature of the January numbers. As such, the figures provided further evidence that a labor market that overheated as the pandemic eased is still only slowly losing steam, despite a succession of big interest rate hikes by the Federal Reserve.

"The idea that [the] Fed cycle is ending sooner than ECB or BOE may be in question," said Kathy Jones, chief fixed-income strategist with Charles Schwab. Fed chair Jerome Powell had raised hopes of a 'pivot' later this year at a press conference on Wednesday when he argued that a "disinflationary trend" had already begun.

Analysts said the details of the report raised the likelihood that the Fed can achieve a 'soft landing' for the economy, rather than the recession that many fear. Average weekly hours worked rose to 34.7, the highest in 10 months, amid anecdotal evidence of people taking more side jobs to claw back with extra earnings the spending power that they lost to inflation last year.

Traders were also eyeing Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN), and Google-parent Alphabet (NASDAQ:GOOGL), with shares in all three dipping following the release of their latest earnings.

Apple posted fiscal first quarter results that missed analyst expectations, pressured by weaker iPhone sales and production issues in China, while earnings and revenue for the fourth quarter at Alphabet were also hit by slowing online ad spending. Meanwhile, Amazon beat revenue expectations for the fourth quarter but top-line performance from its key cloud business was slightly below estimates.

"All in all, the initial market reaction to last night’s numbers looks disappointing and could lead to some read across in some chip makers, and other related suppliers to the sector," said Michael Hewson, chief market analyst at CMC Markets U.K.

"But we should also remember all three companies have seen big gains in their share prices so far this year, so perhaps it’s time for a bit of a pause as we head into the weekend."

In other corporate news, shares in Nordstrom (NYSE:JWN) soared by more than 30% after the Wall Street Journal reported that activist investor Ryan Cohen is building a large stake in high-end retailer Nordstrom. Citing people familiar with the matter, the paper said Cohen - famous for his bets on meme stocks like GameStop Corp. (NYSE:GME) - is aiming to enact changes to the company's board and slash costs.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.