U.S. stock futures turn lower after much stronger-than-expected jobs report reinforces Fed rate hike expectations

Market drivers

The U.S. economy added 528,000 jobs in July, the Labor Department reported, far exceeding the 258,000 consensus estimate. The unemployment rate ticked down to 3.5% from 3.6%, while average hourly earnings climbed 15 cents, or 0.5%, to $32.27.

Announcements of layoffs by a number of high profile companies had earlier raised concerns that a robust labor market may be softening.

“Friday’s extremely strong jobs data suggests that many businesses are not allowing recession fears to stand in the way of hiring,” said Ryan Belanger, managing principal and founder at Claro Advisors. “The jury is out on whether this robust pace of hiring can continue as many large and small companies have recently taken steps to slow hiring or even layoff existing employees.”

“We believe next Wednesday’s Consumer Price Index data will weigh more heavily on Federal Reserve policy than Friday’s jobs report, as fighting inflation is the Fed’s top focus,” Belanger said in emailed comments.

Fed-funds futures traders priced in a 66% chance of a 75 basis point rate hike in September, up from 34% on Thursday. Traders see a 59.5% probability of a 50 basis point move.

Meanwhile, geopolitical tensions remain an undercurrent for markets. China conducted “precision missile strikes” Thursday in waters off Taiwan’s coasts as part of military exercises that have raised tensions in the region to their highest level in decades following a visit by U.S. House Speaker Nancy Pelosi to the island.

Five of the missiles fired by China landed in Japan’s Exclusive Economic Zone off Hateruma, an island far south of Japan’s main islands, Japanese Defense Minister Nobuo Kishi said. He said Japan protested the missile landings to China as “serious threats to Japan’s national security and the safety of the Japanese people.”

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Companies in focus

• Tesla Inc.
  TSLA,
  +0.40%
  shareholders on Thursday approved a proposal expected to lead to a 3-for-1 stock split and sided with the company on most of the proposals up for a vote. Shares were off 0.5% in premarket trade.

• Meme-stock favorite AMC Entertainment Holdings Inc.
  AMC,
  +2.47%
  late Thursday announced a special dividend in the form of “Ape” preferred shares. AMC shares fell 9%.

• Shares of Twilio Inc. TWLO fell 9.6% after the software company’s outlook came in below Wall Street expectations following a reported beat in the previous quarter.

• DoorDash Inc.
  DASH,
  +2.34%
  shares jumped 11% after the company late Thursday reported continued growth in the second quarter, saying that its food-delivery business remains healthy despite economic uncertainty, though its loss was worse than what Wall Street expected.

• Shares of Cloudfare Inc.
  NET,
  +0.12%
  jumped 18% after the cybersecurity company reported results late Thursday that topped Wall Street expectations and hiked its revenue outlook for the year.

• Beyond Meat Inc.
  BYND,
  -7.81%
  shares fell 3% after the maker of plant-based meat substitutes Thursday afternoon posted a larger-than-expected net loss and smaller-than-expected revenues, while announcing layoffs.

• Block Inc.
  SQ,
  +1.85%
  shares fell 7% after the payment-technology company late Thursday swung to a loss and projected that July volume growth for the Square seller business would be lower than what was expected in the second quarter when looking on a year-over-year basis.

• Carvana Co.
  CVNA,
  -3.90%
  shares jumped 8.5%, though the used-car retailer missed expectations with its second-quarter revenue and logged a larger loss than analysts were anticipating.

Other assets

• The yield on the 10-year Treasury note
  TMUBMUSD10Y,
  2.803%
  rose 3 basis pints to 2.701%. Yields and debt prices move opposite each other.

• The ICE U.S. Dollar Index
  DXY,
  +1.01%,
  a measure of the currency against a basket of six major rivals, was up 0.2%.

• Bitcoin
  BTCUSD,
  +2.43%
  rose 2.4% to trade above $23,200.

• The U.S. oil benchmark
  CL.1,
  -0.77%
  fell 0.7% to trade below $88 a barrel, while gold futures
  GC00,
  -1.26%
  were off 0.3% near $1,801 an ounce.

• The Stoxx Europe 600
  SXXP,
  -0.75%
  fell 0.3%, while London’s FTSE 100
  UKX,
  -0.23%
  was down 0.2%.

• The Shanghai Composite
  SHCOMP,
  +1.19%
  ended with a gain of 1.2%, while the Hang Seng Index
  HSI,
  +0.14%
  in Hong Kong rose 0.1% and Japan’s Nikkei 225
  NIK,
  +0.87%
  gained 0.9%.

The Associated Press contributed to this report.