By Johann M Cherian and Shristi Achar A
(Reuters) – Wall Street’s main indexes were on course to open lower on Friday after a stronger-than-expected jobs report signaled resilience in the labor market and tempered expectations of rapid interest rate cuts this year.
A Labor Department report showed U.S. employers hired more workers than expected in December while raising wages at a solid clip. Non-farm payrolls increased by 216,000, compared with estimates for an increase of 170,000, according to economists polled by Reuters.
The unemployment rate held steady from November at 3.7%, compared with expectations of a 3.8% rise, while average earnings advanced 0.4% on a monthly basis, against forecasts of 0.3% growth.
“While the data confirms that the economy is strong and that a soft landing is in play, it’s a bit of a reality check for a market that was slightly ahead,” said Ross Mayfield, investment strategy analyst at Baird.
“This report certainly pushes expectations out a little bit and May is probably a good base case to use right now (for rate cuts).”
Money markets have scaled back expectations for a rate cut in March, with traders now seeing a 57% chance of at least a 25-basis point cut, from nearly 65% before the data, according to the CME Group’s FedWatch tool.
Yields on U.S. Treasury notes, an indicator of interest rate expectations, ticked higher after the data, with the yield on the benchmark 10-year note climbing beyond 4% to a three-week high. [US/]
On a weekly basis, the benchmark S&P 500 was on track for its worst performance since late October as investors cashed in after a nine-week winning streak driven by bets that aggressive rate cuts were on the horizon.
The Nasdaq was on course for its worst week since late September, impacted by rotation out of tech-heavy stocks into defensive sectors like healthcare, financials and utilities.
At 8:49 a.m. ET, Dow e-minis were down 144 points, or 0.38%, S&P 500 e-minis were down 20.5 points, or 0.43%, and Nasdaq 100 e-minis were down 78.75 points, or 0.48%.
Among individual stocks, Tesla shed 0.8% before the bell. The electric-vehicle maker is conducting an effective recall on 1.62 million vehicles in China, the market regulator said.
Other megacap names including Apple and Alphabet lost 0.6% and 0.4%, respectively.
Chipmakers Micron Technology, Intel and Qualcomm also declined between 1.8% and 1%.
Applied Therapeutics tumbled 31.9% after the drug developer’s heart disease drug showed disappointing results in a late-stage trial.
Palantir Technologies lost 4.5% after Jefferies downgraded the data analytics firm to “underperform” due to high stock valuations.
Later in the day, investors will parse remarks by Richmond Federal Reserve President Thomas Barkin, a voting member this year.
(Reporting by Johann M Cherian and Shristi Achar A in Bengaluru; Editing by Devika Syamnath)
