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Stock futures rose and bond yields wavered after data showing labour-market softening reinforced speculation the Federal Reserve will have room to skip an interest-rate hike in September. After swinging between gains and losses, S&P 500 contracts pushed higher. Treasury two-year yields, which are more sensitive to imminent Fed moves, were little changed alongside the dollar.
US employment increased at a more moderate pace in July while wages rose at a solid clip, consistent with sustained labour demand that’s at the root of renewed momentum in the economy. Nonfarm payrolls increased 187,000 last month following a similar increase in June, a Bureau of Labor Statistics report showed.
The unemployment rate dropped to 3.5% and wage growth rose at a firm pace. “There is nothing within this release that will necessitate the Fed moves in September, and as a result, we’re unsurprised to see a limited response in the US rates market,” wrote Ian Lyngen at BMO Capital Markets.
Bank of America Corp’s clients were net sellers of stocks for a second straight week in the five days through August 2, while bond purchases were the strongest since October in the past two weeks.
“Private clients are shifting back to ‘risk-off’ mode,” BofA strategist Michael Hartnett wrote, adding that a hard landing was still a risk for the second half of 2023 amid higher bond yields and tighter financial conditions.