Investing.com -- All eyes are on the release of the eagerly-awaited monthly U.S. jobs report for clues over when the Federal Reserve will start cutting interest rates. Apple has announced its first job cuts since the pandemic, while Treasury Secretary Janet Yellen is visiting China.
1. Nonfarm payrolls loom large
Friday’s main focus will be the widely-watched monthly U.S. nonfarm payrolls report, due for release later in the session, which could make or break the case for a first Federal Reserve rate cut in June.
A series of Fed officials, including Chair Jerome Powell, have stressed the need for the U.S. central bank to continue to study more data before a rate-cutting cycle is started.
Surprise growth in U.S. manufacturing at the start of the week resulted in traders paring back bets of an imminent Fed easing cycle, only for them to backtrack after a downbeat U.S. services sector survey released days later.
Expectations are for nonfarm payrolls to have increased 212,000 jobs in March, a drop from 275,000 jobs the previous month, amid tentative signs that labor market conditions in the world's largest economy are easing.
That said, “We estimate nonfarm payrolls rose by 240k in March—above consensus,” said analysts at Goldman Sachs (NYSE:GS), in a note. “Our forecast reflects a continued boost from above-normal immigration, as new entrants to the labor force are matched to open positions.”
Investors – and the Federal Reserve – will also have an eye on wage growth, with average hourly earnings expected to have gained 0.3% in March, up from February’s 0.1% jump.
2. Futures rebound ahead of key labor data
U.S. stock futures edged higher Friday, rebounding to a degree after the previous session’s sharp selloff, with the focus on the release of key labor market data.
By 04:05 ET (08:05 GMT), the Dow futures contract was 70 points, or 0.2%, higher, S&P 500 futures climbed 16 points, or 0.3%, and Nasdaq 100 futures rose by 72 points, or 0.4%.
The main Wall Street indices closed sharply lower Thursday after Minneapolis Federal Reserve President Neel Kashkari questioned if interest rates should come down at all this year as inflation has remained above target.
The blue chip Dow Jones Industrial Average fell well over 500 points, or 1.4%, its biggest daily drop for more than a year, while the broad-based S&P 500 index dropped 1.2% and the tech-heavy Nasdaq Composite slumped 1.4%.
All three indices are on course for losing weeks, with the Dow set for its worst weekly performance since March 2023.
All eyes are now on the release of the all important official monthly jobs report later in the session [see above], which could provide important information as the Fed seeks to decide when to start cutting interest rates.
3. Apple announces layoffs in California
Apple (NASDAQ:AAPL) has announced it is laying off more than 600 workers in California, its first major job losses since the pandemic.
The news comes just a few weeks after Apple canceled a long-running project to build an electric, self-driving car in a team called the Special Projects Group.
The tech giant has had a difficult 2024, with its share price down almost 12% year-to-date.
The U.S Department of Justice last month announced plans to sue the iPhone maker for monopolizing the smartphone market, warning that a break-up order is not excluded as a remedy to restore competition.
Additionally, Apple's iPhone sales in China fell 24% year-on-year in the first six weeks of 2024, according to data from research firm Counterpoint.
This sharp decline, occurring in the world's largest smartphone arena, reflects not just a dampened demand for Apple's marquee device but also signals the intensifying competition from local manufacturers.
4. Yellen calls for China to address over capacity
Janet Yellen has begun a five-day visit to China, her second as U.S. Treasury Secretary, in a move partly aimed at trying to ease tensions between the world’s two largest economic powers.
Yellen said, before she arrived, that her visit would be a “continuation of the dialogue that we have been engaged and deepening” ever since U.S. President Joe Biden and Chinese President Xi Jinping met in 2022 in Indonesia.
She called Friday for a level playing field for American companies and workers, while also pointing out the problems that China's excess factory capacity and growing exports are causing abroad, fueling potential trade tensions.
"I believe that addressing over capacity, and more generally considering market-based reforms, is in China's interest," she said.
5. Crude surges on Middle East fears
Oil prices steadied Friday after earlier climbing to their highest level in five months as worsening geopolitical tensions in the Middle East raised concerns over tightening supply.
By 04:05 ET, the U.S. crude futures traded 0.2% lower at $86.42 a barrel, while the Brent contract climbed 0.1% to $90.68 per barrel.
Both benchmarks have risen to their highest levels since October, and are set to notch gains of more than 2% this week, climbing for a second straight week.
Iran, the third-largest OPEC producer, has vowed revenge against Israel for an attack on Iran's embassy in Syria on Monday, and Israel has vowed to defend itself.
A broader outbreak of war in the Middle East potentially heralds more supply disruptions for oil, and could further tighten markets in the coming months.
Expectations of tight markets were furthered by the Organization of Petroleum Exporting Countries and allies maintaining its current pace of production cuts this week, while ongoing Ukrainian drone attacks on refineries in Russia may have disrupted more than 15% of Russian capacity, a NATO official said on Thursday.
While the prospect of tighter markets was somewhat offset by data showing U.S. production remained at record highs last week, a bigger-than-expected draw in U.S. gasoline inventories indicated that demand in the world’s largest fuel consumer was also picking up.
Focus was now on key nonfarm payrolls data due later on Friday, for more cues on the U.S. economy.