S&P 500 futures turned negative on Friday after U.S. employers added far more jobs than expected in August, a print that pushed up the odds of a September Fed rate hike. Barclays strategist Emmanuel Cau says next week's CPI release is the other data point that could still shift that outlook.
Payrolls beat sends futures lower
Nonfarm payrolls rose 162,000 in August, compared with the 56,000 job additions economists surveyed by Reuters had expected. The unemployment rate held at 4.1%, in line with expectations.
At 08:33 a.m. ET, S&P 500 E-minis fell 17.25 points, or 0.22%. Dow E-minis dropped 152 points, or 0.28%, while Nasdaq 100 E-minis edged up 20.75 points, or 0.07%.
Fed odds firm as CPI looms
The stronger jobs number pushed market pricing for a quarter-point September Fed rate hike to 59%, up from 52% beforehand. Average hourly earnings rose 0.3% month-on-month, matching forecasts and accelerating from 0.2% in July.
July's payrolls figure was also revised up to a gain of 21,000 from an initially reported decline of 23,000, and net revisions for the prior two months totaled 55,000.
Barclays strategist Emmanuel Cau wrote in a note to clients: "Today's payrolls report and next week's CPI release will be crucial." He added that any meaningful downside surprise in that CPI print could still alter the market's policy expectations.
Barclays leans defensive
Cau said Barclays' own economists now project two further Fed rate hikes this year, in September and December, though he stopped short of calling another hike a foregone conclusion. Rising oil prices amid a continuing US-Iran standoff have amplified the inflation picture further, adding pressure on both the Fed and the European Central Bank.
Given that shift, Barclays' tactical stance leans defensive. Cau said hedging and some tactical moderation in beta exposure appears prudent, even as the firm's year-end outlook stays supportive, contingent on rates and oil stabilizing.
Sources: Investing.com, Investing.com
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