Stock futures fell on Friday morning as investors looked to upcoming jobs data for a clue as to how the Federal Reserve might move forward. The action follows a steep sell-off led by banking stocks.
Futures tied to the Dow Jones Industrial Average fell 237 points, or 0.73%. S&P 500 futures fell 0.79% and Nasdaq 100 futures fell 0.55%.
Wall Street posted a losing session on Thursday. The Nasdaq Composite was down 2.05%, while the S&P 500 was down 1.85%. The Dow lost 543.54 points, or 1.66%, as the 30-share index closed below its 200-day moving average for the first time since Nov. 9. All three indices are on track to end the week down at least 3%.
Financial stocks led the market lower in Thursday’s session, dragged by SVB Financial’s 60% drop after it announced a plan to raise more than $2 billion in capital in an effort to offset losses from bond sales.
The announcement spurred a sell-off across the financial sector as investors became increasingly concerned that higher interest rates would result in banks incurring loan losses due to borrower defaults. The financial sector was the worst performer within the S&P 500, down 4.1% – the worst day since 2020.
Wall Street is gearing up for the February jobs report, which is scheduled to be released at 8:30 a.m. ET. Economists polled by Dow Jones expect nonfarm payrolls to rise by 225,000 in the month, marking a slowdown in growth from January’s unexpectedly large gain of 517,000.
The unemployment rate is expected to remain unchanged from January – when it hit a low not seen since 1969 – at 3.4%, according to Dow Jones. Hourly wages are expected to have increased 0.4% compared to the previous month and increased by 4.8% from 12 months ago, economists estimate.
While having more jobs is considered good for the economy, a better-than-expected report could push stocks lower, according to Brad McMillan, chief investment officer of Commonwealth Financial Network. That’s because more workers can signal more demand, he said, which would indicate higher inflation.
Traders are pricing in about a 63% chance that the Federal Reserve will raise interest rates by half a percentage point at its next policy meeting in about two weeks, according to the CME FedWatch Tool. Investors see Friday’s jobs report as a key driver in that decision, given the central bank’s continued focus on the strength of the labor market as justification for interest rate hikes.
“A strong report would be bad news for the Fed, for interest rates and for the markets,” McMillan said. “That’s the problem we face tomorrow.”