Stock futures up after private payrolls report

Stock futures advanced after data on private payrolls added to speculation the Federal Reserve is done with its aggressive hiking campaign and will start cutting interest rates next year.

Just a few days ahead of the U.S. jobs report, another economic reading showed the gradual cooling in the labor market that the Fed would like to see.

Private payrolls increased 103,000 last month, trailing estimates.

The figures triggered an immediate reaction in markets, with S&P 500 contracts signaling the benchmark gauge will halt a back-to-back drop. Ten-year yields fell.

To Stan Shipley at Evercore, the weaker-than-expected ADP Research Institute tally and other high-frequency labor market metrics suggest “soft” employment growth.

“Bottom line, the slowdown in hiring continues and is becoming more obvious,” said Peter Boockvar, author of the Boock Report.

“What I’m mostly focused on right now is the trajectory of activity – and all I see is slowing in multiple places, including now the labor market.”

Friday’s monthly jobs report is currently forecast to show employers added some 187,000 jobs in November.

The unemployment rate is seen holding at the highest level in nearly two years.

“At this point, it will likely take a string of firm U.S. data to truly challenge the current dovish Fed narrative,” said Win Thin at Brown Brothers Harriman & Co.

“We continue to stress that the U.S. economy continues to grow at or above trend even as the rest of the world slips into recession, while price pressures remain persistent enough that the Fed will not be able to cut rates as soon and by as much as the markets think.”

In other economic news, U.S. mortgage rates fell to the lowest level in almost four months last week, spurring the biggest demand for refinancing since February.

Meantime, the Bank of England stepped up warnings about hedge funds shorting U.S. Treasury futures, saying its measure of the net position is now larger than before the “dash for cash” crisis in March 2020.

The heads of the biggest US banks will use a Senate hearing on Wednesday to make their case for watering down rule proposals they argue will harm the economy.

The regulations, which were unveiled in July by the Fed and other regulators, have sparked partisan bickering and a major lobbying campaign.

Elsewhere, the loonie edged higher as traders awaited to get more clues on the outlook for policy, with the Bank of Canada widely expected to keep rates on hold.

Oil extended its declines into a fifth session.

Bitcoin hovered near $44,000 after notching its longest winning streak since May, a rally driven in part by expectations of looser monetary policy.