U.S. Stock Futures Take a Hit Ahead of Key Data as Inflation Concerns Persist

S&P 500 futures fell by 0.28%, while Nasdaq 100 futures dropped 0.32%. Futures tied to the Dow Jones Industrial Average slipped by 79 points

Stock futures were lower early Friday as markets geared up for critical economic data that will help shape the trajectory of the Federal Reserve’s monetary policy.

Investors are awaiting the December nonfarm payrolls report, due at 8:30 a’clock ET, with economists surveyed by Dow Jones expecting an increase of 155,000 jobs. That would mark a sharp drop from the 227,000 addition in November. The unemployment rate is seen holding steady at 4.2%.

A strong payrolls print could signal continued inflationary pressures, which may lead the central bank to keep interest rates on hold or even raise them further.

“A strong report…I think may find the market reaction to that is not great, because it just is one more reason why the Federal Reserve may not lower interest rates this year,” said Brenda Vingiello, CIO at Sand Hill Global Advisors.

A strong jobs report, mixed economic signals

The market is already smarting from recent economic data. The Institute for Supply Management’s services index showed accelerating growth in December, along with higher prices, fanning inflation concerns. At the same time, payroll provider ADP reported that private sector job growth came in weaker than expected last month.

Those mixed signals have traders not anticipating a rate cut at the Fed’s upcoming meeting, with CME’s FedWatch tool showing just a 7% probability of a 0.25% rate reduction.

Major averages headed for weekly declines

All three of the major stock indexes are set for weekly losses as of Friday morning. The S&P 500 is down 0.4% for the week, while the tech-heavy Nasdaq Composite has dropped 0.7%. The Dow Jones Industrial Average is also on track for a 0.2% decline.

Trading was light on Thursday as the New York Stock Exchange closed to observe a national day of mourning for former President Jimmy Carter, contributing to a subdued week of trading.

Los Angeles wildfires adding to investor anxiety

Adding to the economic worries are the wildfires burning in Los Angeles, including the devastating Palisades Fire. The blazes have been among the most destructive in the city’s history, and shares of key utility provider Edison International slid more than 10% during Wednesday’s session.

With the economic uncertainty mounting and external pressures intensifying, Wall Street is facing a challenging landscape as the new year begins.