Futures muted as investors eye payrolls data for interest rate clues

(Reuters) – U.S. stock index futures were subdued on Friday as investors prepared for the crucial monthly payrolls report to gain more insight into the Federal Reserve’s stance on monetary policy for the upcoming year.

The Labor Department’s closely watched report, due at 8:30 a.m. ET, is expected to show U.S. job growth likely picked up steam in November as workers in sectors ranging from automobiles to casinos returned after their hard-fought strikes.

Nonfarm payrolls likely increased by 180,000 jobs last month after rising 150,000 in October, according to a Reuters poll of economists. The unemployment rate is forecast to remain unchanged at nearly a two-year high of 3.9%.

A slew of data this week has indicated a softening labor market, fuelling bets that the Fed was at the end of its tightening campaign and could pivot to lower rates soon.

Some analysts have warned that a stronger-than-expected reading could throw cold water on such hopes.

“The fact that the data released earlier this week hinted at a clear loosening in the U.S. jobs market makes many investors think that today’s official data will also follow the loosening trend,” Ipek Ozkardeskaya, senior market analyst at Swissquote Bank, wrote in a note.

“If the data is soft enough, the rally in U.S. bonds could continue … while a stronger-than-expected figure could help scale back dovish (Fed) expectations.”

Optimism around peaking interest rates and upbeat quarterly earnings have led to a strong rebound in equities towards the end of the year, while the has plunged from its October peak of about 5%.

The has risen 19% so far in 2023 and is within the spitting distance of its highest intraday level of the year hit in July.

The Fed is due next week to hold a monetary policy meeting, where it is widely expected to keep rates unchanged. Bets that the central bank will deliver a rate cut of at least 25 basis points in March currently stand at 58%, according to the CME Group’s (NASDAQ:) FedWatch tool.

At 5:18 a.m. ET, were up 22 points, or 0.06%, were up 1.75 points, or 0.04%, and were down 10.75 points, or 0.07%.

Among major movers, Qualcomm (NASDAQ:) slipped 1.2% in trading before the bell as Morgan Stanley downgraded the chip firm to “equal weight” from “overweight.”

Broadcom (NASDAQ:) rose 1.2% following fourth-quarter results.

Investors will also watch out for the University of Michigan’s preliminary consumer sentiment data for December later in the day.

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