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Wall St set for lower open as jobs report stokes rate-hike worries

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Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., March 31, 2023. REUTERS/Andrew Kelly

U.S. stock indexes were on track for a lower open on Monday on growing concerns that the Federal Reserve will continue to hike interest rates after Friday’s jobs data highlighted a still-strong labor market.

Futures tied to the tech-heavy Nasdaq 100 led losses after the long weekend, with growth stocks including Apple Inc (AAPL.O), Inc (AMZN.O) and Microsoft Corp (MSFT.O) slipping between 0.7% and 1.3% in premarket trade.

U.S. employers maintained a strong pace of hiring in March, data on Friday showed, pushing the unemployment rate down to 3.5% and raising odds of the Fed hiking rates one more time next month.

“Investors remain very optimistic that the (rate) increases will come to an end, but the data which the Fed is so dependent on seems to leave room for at least a 25-basis point increase one more time,” Rick Meckler, partner at Cherry Lane Investments, said.

“One has to step back and look at a bigger picture than just these week-to-week market battles over data. It’s going take a few more months to see whether the economic slowdown continues or consumer spending comes back and once again rescues us from a true recession.”

A string of reports last week, including weak private payrolls and job openings data, pointed to slowing labor demand and raised hopes of the Fed pausing its market-punishing rate hikes amid the recent banking sector turmoil.

However, the odds of a 25-basis point rate hike by the Fed in May rose to over 65% after the jobs data on Friday, according to CME Group’s Fedwatch tool, from 57% last week.

The focus this week will shift to U.S. consumer and producer prices data, minutes from the Fed’s March meeting and quarterly results from big U.S. banks including JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N) and Wells Fargo & Co (WFC.N).

Analysts expect S&P 500 companies’ profits to shrink 5.2% in the first quarter, as per Refinitiv IBES estimates, a reversal from the 1.4% growth forecast at the start of the year.

At 08:21 a.m. ET, Dow e-minis were down 122 points, or 0.36%, S&P 500 e-minis were down 21.5 points, or 0.52%, and Nasdaq 100 e-minis were down 107.75 points, or 0.82%.

Tesla Inc (TSLA.O) fell 2.6% after the electric-vehicle maker cut prices in the United States between 2% and nearly 6%, a move that analysts cautioned could hurt profitability.

First Republic Bank (FRC.N) fell 4.1% as the lender said on Friday it plans to suspend payments of quarterly cash dividends on its preferred stock “as a measure of prudent oversight”.

Shares of regional banks slipped after Fed data on Friday showed overall credit from U.S. banks declined by a record of more than $120 billion in the latest week, on a nonseasonally adjusted basis.

Western Alliance Bancorp (WAL.N) and PacWest Bancorp (PACW.O) were down 1.4% and 2.5%, respectively.

Pioneer Natural Resources Co (PXD.N) jumped 6.7% following a report that Exxon Mobil Corp (XOM.N) held preliminary talks with the company about a possible acquisition of the shale oil producer.

Semiconductor stocks such as Micron Technology Inc (MU.O) and Western Digital Corp (WDC.O) gained 5.5% and 4.7%, respectively, following Samsung Electronics Co Ltd’s (005930.KS) plans to cut chip production.

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