Five things you need to know before the market opens on Thursday July 6:
1. -- Stock Futures Lower As Hawkish Fed Minutes Lift Treasury Yields
U.S. equity futures extended declines Thursday, while investors eyed key moves in the bond market following the release of minutes from the Federal Reserve's last policy meeting that suggest interest rates will remain 'higher for longer' heading into the second half of the year.
The minutes, taken from the Fed's June meeting where officials voted to pause their run of ten consecutive increases, noted that "almost all participants ... judged that additional increases in the target federal funds rate during 2023 would be appropriate."
The hawkish tenor, which echoed recent comments from Chairman Jerome Powell, lifted benchmark 10-year Treasury note yields to 3.977% in overnight trading, the highest since March, in a move that could quickly test the 4% level crucial for U.S. stock performance.
"If the US 10-year yield breaks above 4% and marches on to challenge the previous cycle highs around the 4.25% it could change the dynamics in the US equity markets," Saxo Bank strategists wrote Thursday. "With rising bond yields a positive Q2 earnings season becomes more important to justify the current equity valuations under rising yields."
Jobs data over the coming days could spark a sustained test of the bond market's 4% threshold, as well, with payroll figures on Friday expected to show the economy added another 245,000 new positions over the month of June.
Benchmark 2-year note yields were also on the move, rising another 3 basis points to 4.974%, while the U.S. dollar index slipped 0.14% against a basket of its global peers to 103.329 in overnight dealing.
Oil prices extended gains in overnight trading as well, with WTI crude futures for August delivery rising 46 cents to $72.25 per barrel, following yesterday's move by the U.S. Navy to prevent Iranian ships from seizing two tankers in the Straight of Hormuz.
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 were indicating a 19 point opening bell decline while those linked to the Dow Jones Industrial Average were priced for a 160 point pullback. Nasdaq futures were down 55 points.
In overnight trading, the MSCI ex-Japan index fell 1.55% into the close of trading while Japan's Nikkei 225 ended the session down 1.2% as the yen powered higher amid a broadly defensive session in regional foreign exchange trading.
The Europe-wide Stoxx 600 was marked fell 01.16% in early Frankfurt trading while Britain's FTSE 100 fell 1.18% in London.
2. -- Employment Data In Focus With ADP, Jolts, Weekly Jobless Claims On Deck
Markets will navigate four key employment data releases Thursday as investors look cement their case for further Federal Reserve rate hikes over the coming months while testing the broader resiliency of the domestic economy.
Payroll processing group ADP will publish its National Employment report at 8:15 am Eastern time, with analysts looking for a modest decline in private-sector hiring from the previous month and an overall tally of 228,000 new jobs added in June.
Weekly jobless claims from the Labor Department will follow at 8:30 am Eastern time, with investors expecting a 6,000 increase in new applications, to 245,000, but a modest decline in the closely-tracked four-week average.
Alongside those two release, Challenger Gray will publish its monthly tall of job cuts for the month of June at 7:30 am Eastern, while the Bureau of Labor Statistics will release its May Job Openings and Labor Turnover Survey (JOLTS) report, which is keenly watched by the Fed, at 10:00 am Eastern. Economists expect to see openings fall to 9.935 million from the April total of 10.1 million.
3. -- Treasury Secretary Janet Yellen Arrives In China For Key Trade Visit
U.S. Treasury Secretary Janet Yellen will kick off a four-day visit to China Thursday as part of a renewed effort by President Joe Biden to mend trade ties with the world's second largest economy.
Yellen is expected to raise the issues of climate change during her visits with Communist Party leaders in Beijing, alongside discussions centered around pandemic preparations and debt. The larger focus of the visit, however, will be to repair some of the damage to trade ties that have resulted from a series of tit-of-tat export bans in the tech sector.
The Treasury Secretary is also expected to stress the fact that the U.S. is not looking to 'de-couple' its economy from China, despite Washington's recent focus on national security over trade, while laying the groundwork for an expected meeting between President Biden and President Xi Jinping at the Asia-Pacific Economic Cooperation in November.
4. -- Exxon Shares Slide As Oil Major Cautions On Q2 Profit Hit
Exxon Mobil (XOM) share move lower in pre-market trading after the biggest U.S. oil producer cautioned that second quarter profits would fall sharply from last year.
Exxon said slumping natural gas prices, as well as narrowing refining margins, would combine to hive around 56% from last year's operating earnings total when it publishes the figures on July 28.
Exxon posted record net profits of $11.4 billion over the three months ending in March, powered in part by a surge in global crude prices linked to Russia's invasion of Ukraine, and the company said it remains on track to cut costs by around $9 billion, compared to 2023 levels, by the end of the year.
Exxon shares were marked 0.85% lower in pre-market trading to indicate an opening bell price of $106.00 each.
5. -- Meta Nabs 10 Million Users For new 'Twitter Killer' App Threads
Meta Platforms (META) shares jumped higher in pre-market trading after the social media group said it added more than 10 million new users in less than 24 hours amid the launch of its new micro-blogging app 'Threads'.
Threads, a text-based messaging app that has been dubbed a "Twitter Killer" by some analysts, added the 10 million new users as changes on the Twitter platform, introduced earlier this week by Elon Musk, continue to disrupt the site's day-to-day activities.
Meta, meanwhile, is extending its run of "look-alike" programs, including Reels, a variation of TikTok, and Stories, a take-off from Snap Inc.'s (SNAP) disappearing messages, to build on its 3 billion-plus user base.
“There should be a public conversations app with 1 billion-plus people on it,” Meta CEO Mark Zuckerberg said in his first series of posts on the platform. “Twitter has had the opportunity to do this but hasn’t nailed it. Hopefully we will.”
Meta shares were marked 1.4% higher in pre-market trading, indicating an opening bell price of $298.50 each
