Wall Street futures jumped higher Friday after a stronger-than-expected jobs report, paired with only moderate wage gains, added more evidence that inflation pressures could ease into the latter part of the year.
The U.S. economy added 850,000 new jobs last month, a much stronger reading than the 700,000 forecast, but wage growth rose 3.6% on the year as bosses added salary sweeteners to lure workers back onto the shop floor.
That, alongside the trillions in fiscal stimulus — including a $715 million surface transportation infrastructure bill passed by Congress only last night — and record levels of central bank support, could carry faster inflation prospects well into next year as the economy extends its post pandemic recovery.
The Fed’s preferred inflation gauge, the core PCE Price Index, rose 3.4% from last year in May, the highest since 1991, while headline CPI was pegged at 5% amid a surge in car and travel prices.
The U.S. dollar is sitting a 15-month high against the yen, and near similar levels on an index basis against a basket of its global peers, largely on the basis of a hawkish reaction from the Federal Reserve to faster inflation prospects.
However, the wage gains fell shy of Street forecasts, and bond markets remained muted, with benchmark 10-year notes trading at 1.432% following the data release.
That could leave stocks vulnerable to big moves throughout the session, although the market’s key benchmark volatility gauge, the VIX, is holding at the lowest levels in more than a year.
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Future contracts tied to the Dow Jones Industrial Average were marked 90 points higher, while those linked to the S&P 500 are indicating a 13.3 point advance from last night’s record close, the sixth in succession.
Nasdaq Composite are indicating a modest 75 point bump for the tech-focused benchmark.
Tesla shares were active in pre-market trading, falling 0.3% following second quarter delivery figures that topped 200,000 for the first time on record.
Virgin Galactic shares were also on the march, rising 26.4% in heavy volumes after billionaire founder Richard Branson said he would board the group’s maiden space flight on July 11, just a few days ahead of Jeff Bezos’ Blue Origin.
In Europe, stocks hovered near record highs ahead of the U.S. jobs data, with semiconductors and automakers driving the region-wide Stoxx 600 to an early 0.24% advance.
In Asia, a 1.9% slide for China’s Shanghai Composite, potentially linked to yesterday’s bellicose address from President Xi Jinping, pulled regional stocks lower, as did the renewed surge in Delta variant coronavirus infections, which has triggered lockdowns in Sydney, emergency measures in Indonesia and the highest rate of infections in more than six months in South Korea.
Oil prices were modestly weaker, largely as a result of the firmer U.S. dollar, as traders awaited the final word from yesterday’s delayed OPEC+ meeting in Vienna, with reports still suggesting the cartel will make only modest changes to its production cut pact while extending it into April of next year.
WTI crude futures for August delivery, the benchmark for U.S. oil and gas prices, slipped 10 cents on the session to trade at $75056 per barrel, still near to the highest levels since November of 2014.
Brent crude contracts for September delivery, which are more tightly-aligned to global prices, were marked 25 cents per barrel lower at $75.58.
This article was originally published by TheStreet.