U.S. stock futures declined in early Tuesday trading as investors eagerly awaited crucial labor data that will likely shape the tone of next week’s Federal Reserve meeting. The market’s performance will be heavily influenced by the upcoming data releases.

How are Stock-Index Futures Trading?

  • S&P 500 futures (ES00) dipped 10 points, or 0.2%, to 4566.
  • Dow Jones Industrial Average futures (YM00) fell 35 points, or 0.1%, to 36233.
  • Nasdaq 100 futures (NQ00) eased 62 points, or 0.4%, to 15807.

On Monday, the Dow Jones Industrial Average (DJIA) declined by 41 points, or 0.11%, closing at 36204. The S&P 500 (SPX) saw a decrease of 25 points, or 0.54%, ending at 4570. Similarly, the Nasdaq Composite (COMP) dropped 120 points, or 0.84%, settling at 14185.

The futures market suggests that stocks will struggle to maintain the strong rally observed in recent weeks.

The S&P 500 reached its highest level since March 2022 on Friday due to falling bond yields and optimistic expectations about easing inflation, which indicated the Federal Reserve’s potential completion of interest rate hikes.

However, the start of this week marked a more cautious sentiment among traders. Some investors decided to cash in on their gains, particularly in prominent technology companies, leading to a 0.5% decline in the S&P 500.

This cautious outlook continues on Tuesday, even as benchmark Treasury yields (BX:TMUBMUSD10Y) approach three-month lows. The negative performance of Asian stock markets dampened sentiment, with the Hang Seng index (HK:HSI) falling 1.9% and the Shanghai Composite (CN:SHCOMP) losing 1.7%, both reaching their lowest levels in over a year. Moody’s downgrade of China’s debt outlook further highlighted the challenges faced by the world’s second-largest economy.

Market Volatility and Key Economic Updates

The recent stability of the markets has experienced a slight waver in the past 24 hours, according to Jim Reid, a strategist at Deutsche Bank. Despite the absence of a specific catalyst, the incredible rally witnessed in November and the prevalence of long positions have led to a degree of skepticism regarding its sustainability. This doubt will likely persist until additional soft-landing friendly data becomes available.

Investors eagerly await forthcoming jobs reports to ascertain whether they can provide reinforcement to this narrative. The week begins with the release of the JOLTS (Job Openings and Labor Turnover Survey) at 10 a.m. Eastern on Tuesday. Subsequently, the ADP survey of private sector hiring will be unveiled on Wednesday, followed by the weekly unemployment claims data on Thursday, and finally culminating with the highly anticipated nonfarm payrolls report on Friday.

Concern over labor market data, scheduled for release in the upcoming week, has caused some apprehension among market participants. Specifically, there are worries that the data could exhibit stronger figures than what the Federal Reserve desires at this stage. Steve Clayton, head of equity funds at Hargreaves Lansdown, highlighted this concern.

The Federal Reserve will conclude its December policy meeting on December 13, with expectations firmly set on keeping interest rates unchanged within a range of 5.25% to 5.50%.

On Tuesday, apart from the aforementioned jobs reports, other significant U.S. economic updates are expected. The S&P services purchasing managers’ index for November will be released at 9:45 a.m., followed by the ISM services for November report at 10 a.m.

Additionally, several companies are set to release their financial results on Tuesday. These include NIO, AutoZone, and J.M. Smucker before the opening bell, while Toll Brothers, Asana, and Box will announce their results after the market closes.

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