Stock futures opened TK Thursday evening as investors looked ahead to a key report on the U.S. labor market recovery.
Contracts on the S&P 500 TK after the blue-chip index set an all-time high during Thursday's session, kicking off the start of the third quarter on a high note. Both the Nasdaq and Dow also closed out Thursday's session higher.
On Friday, investors will receive the U.S. Labor Department's June jobs report, the central economic data point coming out this week. The print is expected to show an acceleration in hiring, with non-farm payrolls anticipated to have risen by 720,000 for a sixth straight monthly gain. The unemployment rate is expected to drop to 5.6%, or a new pandemic-era low.
Heading into the report, equities have been buoyed by a slew of strong economic data earlier this week, especially on the labor market. Private payrolls rose by a better-than-expected 692,000 in June, according to ADP, and weekly initial jobless claims improved more than expected to the lowest level since March 2020. Still, other reports underscored the still-prevalent labor supply challenges impacting companies across industries, with the scarcity capping what has otherwise been a robust economic rebound.
"It's really the labor market supply that's putting the brake on hiring right now," Luke Tilley, chief economist for Wilmington Trust, told Yahoo Finance. "But we're pretty optimistic, the market is pretty optimistic, and we think that's a big part of what's driving these indexes higher."
Friday's jobs report will also give markets a suggestion as to the timing of the Federal Reserve's next monetary policy move. For now, the Fed has kept in place both of its key crisis-era policies, or quantitative easing and a near-zero benchmark interest rate. However, an especially strong jobs report and faster-than-expected print on wage growth could justify an earlier-than-currently-telegraphed shift by the central bank.
“For the first time in years, I’m actually worried about a too hot number causing some kind of volatility or pullback in stocks. That’s because the Fed has signaled they are looking to taper QE," Tom Essaye, Sevens Report Research founder, told Yahoo Finance. "And if we get a really, really strong jobs number and a hot wage number, then markets are going to start to say gee, are they going to taper QE maybe before November, or are they going to taper it more intensely than we thought and in a market that's frankly been very calm and a little bit complacent, that could cause volatility."
Still, the Fed has suggested it would not react rashly to single reports, and has given itself leeway to adjust the timeline of its monetary policy pivots as more data comes in.
"I think everyone's counting on the Fed continuing really for the foreseeable future. So I don't see any big changes there coming before 2023," Octavio Marenzi, CEO and founder of Opimas, told Yahoo Finance. "And even then the Fed has hedged its bets very significantly – they've basically said we might in 2023 raise interest rates twice, but then again we might not. So I think the smart money is betting things are going to keep on going, they're going to carry on with a very accommodative monetary policy."
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6:15 p.m. ET Thursday: Stock futures drift lower ahead of June jobs report
Here's where markets were trading into the overnight session on Thursday:
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S&P 500 futures (ES=F): 4,309.25, -1.5 points (-0.03%)
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Dow futures (YM=F): 34,509.00, -5 points (-0.01%)
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Nasdaq futures (NQ=F): 14,538.25, -10.25 points (-0.07%)
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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