U.S. futures flat with nonfarm payrolls set to impact Fed rate hike odds

Traders work on the floor of the New York Stock Exchange February 5, 2015. REUTERS/Brendan McDermid

Wall Street futures showed cautious trade as investors looked ahead to the publication of the monthly employment report and its implications for the future path of monetary policy decisions from the Federal Reserve (Fed).

The blue-chip Dow futures edged forward 7 points, or 0.04%, by 10:55AM GMT, or 6:55AM ET, the S&P 500 futures was unchanged, while the tech-heavy Nasdaq 100 futures slipped 4 points, or 0.08%.

The lack of any movement in U.S. equity futures on Friday was a result of investors waiting the publication of the monthly employment report due out stateside at 12:30GMT, or 8:30AM ET.

Consensus had forecast the unemployment rate to drop to 4.9% after the creation of 164,000 nonfarm payrolls (NFP).

However, with many Fed officials commenting already that the U.S. economy is at, or close to, full employment, more attention could be focused on wages.

A strong reading could bolster speculation that the Federal Reserve (Fed) will move totighten monetary policy in the following two months.

Chicago Fed president Charles Evans indicated on Friday that two rate hikes this year would be reasonable if economic data continues to be favorable.

However, Evans downplayed the exact timing, stating that it was “not crucial”, as long as “by the end of this year we’re at just a little under 1%”.

Fed governor Lael Brainard was set to be the first policy maker to speak after the jobs report. She will give a speech on the economic outlook and monetary policy at 16:30GMT, or 12:30ET.

Fed fund futures currently price the chance of a hike at the next meeting at 21%, while the probability for a move at the July meeting was at 58%.

After the jobs report, market participants will focus on the ISM non-manufacturing purchasing managers’ index (PMI) for May out at 14:00GMT, or 10:00AM ET.

The U.S. services sector was expected to register a slight drop from the expansion seen in the previous month and the reading will help gauge the strength of the economy as the Fed looks for stronger growth before raising rates.

Beyond Friday’s reports on the state of the U.S. economy, investors looked ahead to Fed chair Janet Yellen’s interpretation of the data. Yellen will speak on Monday in what will most likely be her final remarks before the policy decision is announced on June 15.

Meanwhile, the US dollar index also showed little movement, with traders cautious ahead of the aforementioned references.

In oil markets, crude prices were steady with slight gains.

Although the Organization of the Petroleum Exporting Countries (OPEC) failed to create a ceiling for oil production on Thursday which initially tumbled the price of oil, experts are pointing to the fact that the members appeared to be more unified and Saudi Arabia, the world’s largest exporter, seemed willing to restrain from flooding the markets.

“We will be very gentle in our approach and make sure we don’t shock the market in any way,” the country’s energy minister said on Thursday.

On Friday, Qatar’s energy minister Mohammed Al-Sada said, “It was a successful meeting, it was full harmony among members. We reviewed thoroughly market’s status of oil supply and demand. The worst was over.”

Oil recovered after the weekly U.S. crude inventories data was released on Thursday.

Though crude stocks fell by a less-than-expected 1.366 million barrels, it contradicted the prior day’s report from American Petroleum Institute’s that saw a 2.35 million barrel build. Also of note, both gasoline inventories and distillate stockpiles fell much more than expected.

Additionally, the Iranian oil minister Bijan Zanganeh indicated on Friday that expectations were for the country to reach production of four million barrels per day, its pre-sanction levels, by the end of 2016.

U.S. crude futures edged up 0.04% to $49.19 by 10:56AM GMT, or 6:56AM ET, whileBrent oil advanced 0.12% to $50.10.

In a light company news day, Twitter Inc (NYSE:TWTR) met with Yahoo! Inc (NASDAQ:YHOO) weeks ago to discuss a possible merger according to the New York Post.

United Continental Holdings Inc (NYSE:UAL) and Delta Air Lines Inc (NYSE:DAL) were named as possible suitors in a Wall Street Journal report that the Panama-based air carrier Avianca Hldgs (NYSE:AVH) could be sold.

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