Futures rise ahead of May jobs data; debt default averted
By Shreyashi Sanyal and Shristi Achar A
(Reuters) – U.S. stock index futures rose on Friday after the country narrowly averted a debt default, with focus now shifting to payrolls data that will determine whether the Federal Reserve sticks to its interest rate-hiking regime.
The Senate passed a bill late on Thursday to lift the government’s $31.4 trillion debt ceiling, avoiding a catastrophic, first-ever default.
Attention now turns to data which will likely show job growth slowed in May, with wages coming off the boil that could allow the Fed to skip an interest rate hike this month for the first time since starting its aggressive policy tightening more than a year ago.
The Labor Department’s closely watched employment report, due 0830 ET, is expected to still show a tight labor market. The unemployment rate is forecast climbing to 3.5% from 3.4% in April, while non-farm payrolls is seen increasing by 190,000 jobs last month after rising 253,000 in April.
Fed funds futures trading showed an over 70% probability that the Fed will hold interest rates steady at its June 13-14 policy meeting. [FEDWATCH]
“With disaster averted for now, attention will turn to other matters which have been overshadowed by the drama in Washington,” said Russ Mould, investment director at AJ Bell.
“U.S. jobs numbers may provide some pointers to the next move by the Fed, whose decision making no longer needs to consider the potential financial stability risks associated with default on U.S. debt.”
At 7:01 a.m. ET, Dow e-minis were up 185 points, or 0.56%, S&P 500 e-minis were up 21.25 points, or 0.5%, and Nasdaq 100 e-minis were up 63 points, or 0.44%.
Megacap stocks including Microsoft Corp (NASDAQ:MSFT), Apple Inc (NASDAQ:AAPL), Tesla (NASDAQ:TSLA) Inc and Meta Platforms rose between 0.3% and 1.3% premarket.
Growth companies rely more on borrowed money so they benefit from lower rates.
Lululemon Athletica (NASDAQ:LULU) Inc jumped 14.7% upon raising its annual sales and profit forecasts on Thursday as wealthy Americans bought its pricey activewear despite high inflation.
This helped boost shares of sportswear companies in both the United States and Europe, with Dow Jones Industrial Average component Nike Inc (NYSE:NKE) up 3.1%. Germany’s Adidas (OTC:ADDYY) and Puma rose around 4.5% each in European trading.
Broadcom (NASDAQ:AVGO) Inc fell 0.6% after reporting quarterly results.
The chipmaker forecast third-quarter revenue above market estimates. However, analysts said the outlook was disappointing, as expectations were stacked up against a blockbuster guidance provided by Nvidia (NASDAQ:NVDA) Corp last week. Shares of Nvidia, the world’s most valuable chipmaker, rose 1.4%.