Stock futures fell in Tuesday evening trade, indicating Wall Street was poised to extend declines as rising COVID-19 infections momentarily upending expectations about growth.
In Tuesday’s regular session, the Dow Jones Industrial Average and S&P 500 Index lost ground, but the technology-laced Nasdaq bucked the trend by posting a marginal gain. The market has mostly taken disappointing news in stride, but August’s jobs data falling far short of market expectations last week tempered hopes for the fourth quarter.
Payrolls showed the economy creating a relatively slim 235,000 new positions, and stoked speculation that the Federal Reserve’s Open Market Committee (FOMC) could alter its timetable for scaling back its stimulative bond-buying, which has propped up investor confidence.
It also prompted analysts to scale back expectations for the economy for the remainder year. Goldman Sachs cut its forecast for fourth-quarter growth, citing a “harder path ahead” for consumer spending in the face of rising COVID-19 infections.
While the ongoing COVID-19 pandemic fueled by the Delta variant figured prominently in the jobs miss, especially for softness in the leisure, hospitality and bars/restaurant sector, some analysts have also pointed to the labor shortage becoming a drag on jobs creation. A lack of available workers have prompted businesses to hike pay, adjust hours, and even lose some business.
“With respect to no job gains in leisure and hospitality, while I’m not discounting the influence of Delta on consumer behavior for some and the supply problems out of Asia because of Covid dictated restrictions, I’m mostly blaming the lack of workers,” veteran market analyst Peter Boockvar said in a research note to clients on Tuesday.
He pointed to National Federation of Independent Business data on Friday that showed plans to hire, positions not able to fill and compensation all at 48-year highs, all records for the survey.
With the trading week shortened by Labor Day, traders will be keeping an eye on producer prices data for hints at inflation pressures, as well as the end of a crucial source of unemployment insurance during the pandemic.
Millions of Americans were offered additional unemployment support during the pandemic with augmented federal unemployment benefits. However, those benefits expired over the weekend, and economists think it will help bolster a labor market that’s suffered from a lack of workers.
According to a Goldman Sachs analysis, “unemployed workers whose benefits ended early saw a statistically significant increase in their re-employment probability … So we expect the benefit expiration to boost job growth in coming months.”
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6:15 p.m. ET Tuesday evening: Stock futures weaken
Here’s where markets were trading in the after-hours session:
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S&P 500 futures (ES=F): 4518, -1.25
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Dow futures (YM=F): 35,082, -9.00
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Nasdaq futures (NQ=F): 15,673.00, -2.00
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By Javier E. David, editor at Yahoo Finance. Follow him at @Teflongeek
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