Wall Street’s main indexes were set to slip at the open on Friday after data pointed to weaker-than-expected job growth, while a rise in wages fueled concerns about higher inflation.
The Labor Department’s report showed nonfarm payrolls increased by 199,000 jobs in December, although the unemployment rate dropped to 3.9% from 4.2% in November, underscoring tightening labor market conditions.
Economists surveyed by Reuters expected nonfarm payrolls to increase by 400,000 jobs in December. The average hourly earnings rose by 0.6% against expectations of 0.4%.
“The topline is a disappointment but the growth of the labor market remains firm,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“Hourly wages are not coming down much, which suggests the Fed is not likely to be derailed by this headline number.”
The data comes after the minutes from the Federal Reserve’s December meeting signaled the central bank may have to raise interest rates sooner than expected amid a “very tight” job market and unabated inflation.
The hawkish tone spurred a rally in U.S. Treasury yields while prompting investors to swap technology-heavy growth shares with more cyclical parts of the market such as energy, financials and industrials that tend to do better in a high interest-rate environment.
Fed funds futures imply a 90% chance of a 25-basis point tightening at the March Fed meeting, and at least three rate hikes by the end of the year.
Shares of Occidental Petroleum and Citigroup rose 1.0% and 0.6%, respectively, in premarket trading, leading gains among major oil and banking companies.
The S&P 500 energy sector, which has gained 9% so far this week, was set for its best weekly rise in ten months. The broader value index added 0.8% this week, outperforming its growth counterpart, which is eyeing its worst week since late February 2021.
At 8:58 a.m. ET, Dow e-minis were down 62 points, or 0.17%, S&P 500 e-minis were down 11.25 points, or 0.24%, and Nasdaq 100 e-minis were down 88.5 points, or 0.56%.
All the three major Wall Street indexes are set for a weekly fall.
Mega-cap tech titans Apple Inc, Microsoft Corp, Amazon.com Inc and Tesla Inc were mixed, after steep losses suffered this week.
“Meme stock” GameStop Corp jumped 18.7% after the video game retailer said it is launching a division to develop a marketplace for nonfungible tokens (NFTs) and establish cryptocurrency partnerships.
Starbucks Corp fell 2.4% after RBC downgraded the specialty coffee retailer’s stock to “sector perform” from “outperform” on valuation and margin outlook.
Discovery Inc added 5.3% after Bank of America upgraded the media company’s stock to “buy” from “neutral”.