By Caitlin Ostroff
U.S. stock futures edged higher Thursday ahead of data that will offer fresh cues on the pace of recovery in the labor market.
S&P 500 futures ticked 0.3% higher, a day after the broad market gauge was dragged lower by technology stocks. Nasdaq-100 futures edged up 0.4%, indicating that technology stocks may recover some ground. The benchmark retreated almost 1.7% on Wednesday. Contracts tied to the Dow Jones Industrial Average ticked up 0.3%.
Investors’ optimism has been muted in recent days by mixed signals from different parts of the economy. The government’s Covid-19 relief spending and the rollout of vaccines is helping spur economic growth. That has led to a surge in consumers’ demand for products.
But there are signs that the global rebound may be slowed by an extension of Covid-19 lockdowns and growing constraints in the supply chain for crucial products such as vaccines and electronic chips. Fresh stimulus checks have also prompted concerns that inflation will rise sharply as the economy recovers, which has curbed appetite for both government bonds and technology stocks.
“From here, you could have in aggregate flattening markets. We’re going to be looking for a new narrative,” Daniel Morris, chief market strategist at BNP Paribas Asset Management. “Growth could recover, value could wait, and then on the surface nothing happens. I have modest expectations for the market until we get a sense of what the next catalyst is.”
In bond markets, the yield on the 10-year Treasury note ticked up to 1.623%, from 1.613% Wednesday. Yields rise when bond prices fall.
Federal Reserve Chairman Jerome Powell indicated Wednesday that he isn’t concerned about the recent rise in long-term bond yields, which had climbed as high as 1.730% last week. He and other policy makers have signaled that they will continue to support the economy until the labor market shows more signs of recovery.
U.S. jobless claims data for the week ended March 20, due at 8:30 a.m. ET, is likely to show that first-time applications for unemployment benefits are near the lowest levels since the pandemic struck last spring. Economists surveyed by The Wall Street Journal expect the filings, a proxy for layoffs, fell to 735,000 last week from 770,000 the prior week.
Even if the labor market gave stronger signals that it is recovering, some investors doubt whether the Fed would raise interest rates in the foreseeable future. Inflation would need to climb above 2% for a period and meet a key objective of the Fed before officials are likely to consider tightening monetary policy.
“This is not about cyclical data for unemployment and inflation, it is a lot to do with debt burdens. The reality is the Fed cannot hike rates because there’s so much debt,” said Salman Ahmed, global head of macro at Fidelity International. “You need a period of sustained inflation to bring that debt burden down.”
In energy markets, Brent crude retreated 1.7% to $63.16 a barrel. The international benchmark for oil climbed 6% Wednesday after Egyptian authorities failed to dislodge a giant container ship that is blocking the Suez Canal. The vessel has jammed up shipping traffic, disrupting transit of products including oil and gas.
Overseas, the Stoxx Europe 600 edged 0.2% lower.
In Asia, most major benchmarks closed higher. Japan’s Nikkei 225 rallied 1.1% and South Korea’s Kospi added 0.4%. China’s Shanghai Composite Index edged down 0.1%.
Write to Caitlin Ostroff at email@example.com
(END) Dow Jones Newswires
March 25, 2021 05:55 ET (09:55 GMT)
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