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S&P 500 FUTURES REMAIN PRESSURED AS YIELDS JUMP AFTER JOBS DATA

S&P 500 futures are negative on the day, but roughly flat with where they were after the release of the latest labor market data.

E-mini S&P 500 futures EScv1 are now down around 0.7% vs. a loss of about 0.6% just before the numbers came out. The futures were already lower amid a sense of caution regarding Middle East developments, and premarket downside follow-through in semiconductor shares.

The May headline jobs number came in at 172,000 vs. an 85,000 estimate. The April reading was revised up to 179,000 from 115,000.

The May unemployment rate was 4.3% vs. a 4.3% estimate, and a 4.3% prior print. Average hourly earnings on a month-over-month and year-over-year basis were both in line with the Reuters Poll.

According to the CME's FedWatch Tool, the probability that the Fed sits on its hands and leaves its current target rate of 3.50%-3.75% unchanged at its June 16-17 FOMC meeting is now around 98% vs. 96% just before the data was released. The chance that the FOMC cuts rates by 25 basis points is now around 2% vs. 4%.

Interest rate probabilities are now suggesting the implied target rate will be about 25 basis points (bps) higher through December 2026 vs. about 16 bps higher just before the data came out.

The U.S. 10-Year Treasury Yield US10YT=RR is now around 4.54%. It was about 4.48% just before the data came out. The yield ended Thursday at 4.477%.

S&P 500 .SPX sector SPDR ETFs are mixed in premarket trading. Tech XLK.P, down nearly 2%, is the weakest group. Healthcare XLV.P, up about 0.7%, is the strongest group.

The State Street Regional Banking ETF KRE.P is flat. The Invesco PHLX Semiconductor ETF SOXQ.O is sliding around 3%.

Regarding the jobs data, Gary Schlossberg, market strategist at the Wells Fargo Investment Institute (WFII), said:

"The report was very strong. We'd had a good increase in May and upward revisions in March and April. We did get an uptick in yields. It may be more of an interest rate story dominating the futures market and stocks at the moment."

Schlossberg added, "We're talking about a strong economy. That just adds to inflation risk coming from the Gulf. It makes it difficult for the Fed to even think about rate cuts and might even increase the chances - although we're still not forecasting that yet - of a rate hike by the Fed before the end of the year against the backdrop of inflation, likely to pick up from here."

"The one restraint on the Fed would have been a softening labor market. We just didn't see that. So there's less of a restraint on the Fed to raise rates as inflation moves up."

Here is a premarket snapshot from around 8:53 a.m. EDT.

(Terence Gabriel, Sinéad Carew)

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