During the Monday trading session, the US stock index futures remained directionless. On the one hand, the traders are coming from holidays, while the recent jobs data has shown strength on the other hand.
This has raised fears among market participants that the Fed will likely continue its policy of interest rate hikes. As a result, the Nasdaq 100 futures contract was down, and so was the Wall Street futures.
And if we look at the major stocks such as Microsoft, Amazon, and Apple Inc., all of them slipped lower during the early premarket session.
For the month of March, the hiring pace among US employers remained strong and thus has pushed the unemployment rate to 3.5% only.
This strong report on the jobs market has increased the chances that the Fed will raise the interest rates in its next meeting (due in a month).
Overall, the nonfarm payrolls saw an increase of 236K jobs which is a little lower than the economist's expectations. But despite missing the expectations, the investors have taken the recent data as positive.
According to economists at Citi, there is a difference between how the Fed and how the markets few the data. If we look at the market, it is expecting the Fed to change its policy on softer data.
But how the Fed will actually interpret the data is a totally different thing & that's what we are seeing in the markets today!
Based on this view, it wouldn't be wrong to say that a strong labor market and high inflation will introduce any interest rate cuts! In fact, persistently strong inflation means more rate hikes throughout 2023!
That's why Citi economists are now pricing in a 25 bps rate hike which will push the Fed's policy rate between 5.50% to 5.75%.
And this negative trend in the futures market will also likely translate to the spot markets as well as the US stock markets.