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The Dow Jones fell over 250 points, while the S&P 500 and Nasdaq declined by 0.2% each as traders chose to exercise caution ahead of one out of the two important data points before the Fed rate decision on December 18, the second being the CPI print for November, which will be reported next week.
Ahead of the payrolls data, initial jobless claims rose to a one-month high of 2,24,000, higher than the 2,15,000 estimate. Trade deficit also narrowed to $73.8 billion as US imports fell the most since November 2022.
Short-term Treasuries underperformed, with the market standing at critical technical levels. Bitcoin pared a rally that earlier drove the digital asset past $100,000, buoyed by President-elect Donald Trump’s pick of a crypto proponent to be the next head of the US securities regulator.
Treasury 10-year yields were little changed at 4.18%. Swap trading shows the implied odds of a quarter-point Fed cut this month around 65%. A measure of France’s bond risk fell amid hopes lawmakers will strike a deal on next year’s budget sooner than many investors had expected.
Oil inched lower in a choppy session after OPEC+ deferred supply increases for three months, but still plans to add barrels next year to a market that’s expected to be oversupplied.
“We’ll get a fuller picture from tomorrow’s monthly jobs report, but for now, the story continues to be a labor market that occasionally appears to bend, but avoids breaking,” said Chris Larkin at E*Trade from Morgan Stanley.
Leading indicators point to a roughly as-expected reading in the payrolls report, with headline job growth potentially coming in somewhere in the 180,000-240,000 range, albeit with a big band of uncertainty given the current global backdrop, according to Matthew Weller at Forex.com and City Index.
A survey conducted by 22V Research shows that 45% of investors believe Friday’s US payrolls data will be “mixed/negligible,” 32% said it will be “risk-off,” and 23% “risk-on.”
“With an interest-rate cut largely priced in at this point, the risks may be skewed slightly toward a bounce in the greenback if the jobs report revives the odds of a December pause,” Weller noted. “Though any market moves might be limited as the Fed’s policy decision is more around when rather than if it will pause rate cuts in the near future.”
(With Inputs From Agencies.)
