US futures tread water ahead of key jobs data, after debt ceiling deal boosts stocks

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Company earnings have consistently beaten Wall Street estimates in the second quarter. JOHANNES EISELE/Getty Images
  • US futures struggled for direction as traders waited for the release of nonfarm payrolls data.
  • A solid gain in September could give the Fed the green light to start cutting back its support for the economy.
  • Stocks rose on Thursday after Democrats and Republicans agreed to extend the debt ceiling until December.
  • See more stories on Insider’s business page.

US futures struggled for direction on Friday, after stocks rose sharply the previous day when Republicans and Democrats struck a deal to raise the debt ceiling into December.

Investors were waiting for the monthly US nonfarm payrolls data, due Friday. Unemployment is expected to fall, boosting the chances that the Federal Reserve will start cutting back support for the economy in November.

S&P 500 futures were down 0.16%, while Dow Jones futures were 0.12% lower. Futures for the tech-heavy Nasdaq 100 were down 0.26%.

European stocks slipped, with the continent-wide Stoxx 600 down 0.46%. In Asia overnight, China’s CSI 300 climbed 1.31% after reopening from a holiday, while Japan’s Nikkei 225 rose 1.34%.

Investors were cheered by the Senate deal to raise the US debt-ceiling, averting the possibility of the country defaulting on its debts. However, the extension only lasts until December, setting up another fight.

“Together with [Treasury Secretary] Janet Yellen, investors breathed a sigh of relief on Thursday,” Chris Scicluna, head of research at Daiwa Capital Markets, said.

The debt deal, along with a fall in US weekly jobless claims on Thursday, helped push up bond yields, as investors bet that an improving labor market would cause the Fed to start “tapering” its asset purchases soon.

The yield on the 10-year US Treasury note was up 2.5 basis points to 1.596% on Friday, its highest level since June. Yields move inversely to prices. The dollar index climbed was flat at 94.21, around its highest level in over a year.

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Bonds and the dollar have strengthened, as investors bet that the Fed will cut back on stimulus measures, particularly the rate at which it buys bonds. Less support for the bond market should push prices down and yields up, making bonds look more attractive and boosting the dollar.

Both the Fed and investors will closely watch the nonfarm payrolls figures out on Friday morning US time. Analysts expect the US economy to have added 500,000 payrolls in September, up from a lackluster 235,000 in August.

“The US jobs data today is anticipated to provide the final green light for the Fed to announce the taper of its asset purchases at the upcoming FOMC meeting in November,” Antoine Bouvet, at Dutch bank ING, said in a note.

Elsewhere, oil prices continued their seemingly relentless march upwards, as a global energy crunch rocks economies around the world. Natural gas prices have surged more than 500% in Europe and are up sharply in Asia, causing users to turn to oil as a substitute for power generation, for example.

Brent crude, the global benchmark, was up 1.12% to $US82.97 ($AU113) a barrel, while WTI crude was 1.17% higher at $US79.20 ($AU108) a barrel.

In the crypto world, bitcoin was up 2.62% to $US55,601 ($AU76,036), having traded at around $US41,000 ($AU56,069) just a week earlier. Bitcoin fans have delighted in the cryptocurrency’s diversion from stocks, which have hit a rocky patch. JPMorgan suggested that institutional buyers are snapping up bitcoin instead of gold as inflation rises.