(Reuters) – U.S. stock index futures fell on Thursday as labor market strength and Federal Reserve Chair Jerome Powell’s remarks keep investors worried about rate hikes as they await a key jobs report that could determine the Fed’s policy path.
With economic data so far suggesting the labor market remains hot despite the Fed’s aggressive monetary tightening over the past year, investors are now focused on the February non-farm payrolls report due on Friday.
The reading is expected to show payrolls increased by 205,000 last month, according to economists polled by Reuters, after January’s blowout 517,000 figure, which had first led markets to reprice their expectations for U.S. interest rates.
“Our US economists expect a positive surprise to payrolls on Friday,” said Citi strategists in a note published late on Wednesday.
“Given that good news is bad news for markets, we think this would likely cause equities to sell-off further and support the case for an outsize Fed hike.”
Before the payrolls data, a separate report from the Labor Department due at 8:30 am ET on Thursday is expected to show an uptick in initial claims for state unemployment benefits for the week ended March 4.
Wall Street’s main indexes ended mixed on Wednesday, with the benchmark S&P 500 eking out marginal gains after Powell reaffirmed his message of likely sharper interest rate hikes, but emphasized that the decision hinged on economic data before the central bank’s March meeting.
Powell’s two-day testimony has led markets, which until recently had been expecting a 25-basis-point rate hike, to dramatically increase their bets for a larger 50 bps increase by the Fed in March, with rates now seen peaking at 5.65% by September.
Nasdaq futures led declines on Thursday, with shares of Tesla Inc down 3.1% in premarket trade and set to extend its losses from the previous session on news of a probe by the U.S. auto safety regulator.
Other Big Tech and growth stocks such as Microsoft Corp, Apple Inc and Amazon.com Inc fell between 0.7% and 0.8%.
At 5:22 a.m. ET, Dow e-minis were down 62 points, or 0.19%, S&P 500 e-minis were down 14.75 points, or 0.37%, and Nasdaq 100 e-minis were down 83.75 points, or 0.68%.
(Reporting by Amruta Khandekar in Bengaluru, additional reporting by Medha Singh; Editing by Vinay Dwivedi)
