Futures Drop With Tesla Jobs, US Payrolls in Focus: Markets Wrap

(Bloomberg) -- US index futures fell after a report that Tesla Inc. Chief Executive Officer Elon Musk said the electric carmaker needs to cut staff amid a gloomy economic outlook. Investors are also awaiting key US payrolls data that they will study for clues on the pace of Federal Reserve policy tightening. 

Tesla shares slid 4.2% in New York premarket trading. Contracts on the Nasdaq 100, where Musk’s company is among the largest index components, were 0.9% lower. S&P 500 futures dropped 0.5%. Europe’s Stoxx 600 index edged higher, with trading volumes reduced by UK holidays marking the Queen’s Jubilee. 

A Bloomberg gauge of the dollar steadied after overnight losses, while the yen held near the psychologically important 130 level against the greenback. Benchmark Treasury yields held at around 2.91%.

Investors remain on edge as some fear the pace of US monetary tightening could throw the world’s largest economy into a recession. Friday’s May labor report is likely to show the smallest gain in jobs since April 2021 alongside a down shift in average hourly earnings growth, Bloomberg Economics said. 

“Investors remain nervous, trying to collect more information about earnings prospects on one side and economic data on the other,” said Cedric Ozazman, head of investment solutions at Mirabaud & Cie SA in Geneva. “The jobs report will be crucial as any bad news will reignite speculation about a pause in the Fed monetary tightening cycle during the last quarter of the year.” 

Still, “any bad economic news might be actually good for risky assets, as they will probably remove some pressure on interest rates,” Ozazman said. The median forecast in a Bloomberg survey of economists is for the payrolls data to show a 320,000 gain after a 428,000 increase in April.

Federal Reserve Vice Chair Lael Brainard said it was hard to see a case for a September pause in rate hikes and that increases of 50 basis points in June and July seemed reasonable. 

Tesla’s Musk said the electric carmaker needs to cut staff by around 10%, noting he had a “super bad feeling” about the economy, according to an internal email seen by Reuters.

Other electric-vehicle stocks dropped in New York premarket trading following the Tesla report, with Nikola Corp. and Rivian Automotive Inc. lower. Elsewhere, Lululemon Athletica Inc. climbed after the athletic-wear retailer’s results surpassed analyst’s expectations and software company Okta Inc. rallied after its earnings. 

“There’s still a long way to go for the selloff,” Tatjana Puhan, deputy chief investment officer at Tobam SAS, said on Bloomberg TV. “What markets completely underestimate at the moment is this idea that inflation is going to persist, that supply disruption will become even worse, the Ukraine conflict is not fully priced in and asset allocations have not adjusted yet either.”

Oil headed for a sixth weekly advance after a keenly anticipated OPEC+ meeting delivered only a modest increase in output that failed to assuage concerns over a widening supply deficit.

How will markets be affected by the Fed’s quantitative tightening? QT officially starts Wednesday and is the theme of this week’s MLIV Pulse survey. Click here to participate anonymously.

Here are some key events to watch this week:

• US May employment report Friday
• The UN’s Food and Agriculture Organization releases its monthly food price index at a time of maximum concern about global supplies on Friday

Some of the main moves in markets:

Stocks

• Futures on the S&P 500 fell 0.5% as of 6:49 a.m. New York time
• Futures on the Nasdaq 100 fell 0.9%
• Futures on the Dow Jones Industrial Average fell 0.3%
• The Stoxx Europe 600 was little changed
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0737
• The British pound fell 0.1% to $1.2562
• The Japanese yen fell 0.3% to 130.18 per dollar

Bonds

• The yield on 10-year Treasuries advanced one basis point to 2.92%
• Germany’s 10-year yield advanced three basis points to 1.27%

Commodities

• West Texas Intermediate crude fell 0.5% to $116.25 a barrel
• Gold futures fell 0.2% to $1,867.60 an ounce

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