Before the Bell: Stock futures dive as jobs report stuns

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The Before the Bell report is compiled by editors of The Globe and Mail and is updated throughout the morning to reflect latest developments. Colin Cieszynski, Chartered Financial Analyst and Chartered Market Technician, is chief market strategist with CMC Markets.

Stock futures immediately turned south after the U.S. jobs report came in much weaker than expected. Only a net 38,000 jobs were created last month, compared to expectations of 160,000. The previous month's numbers were also revised lower.

The U.S. dollar dove and the Canadian dollar shot up on the news and stock futures lost earlier gains to swing negative. U.S. Treasuries and Canadian government bonds surged and gold futures jumped to their highest in a week.

The jobs report may significantly reduce the chance of a June Federal Reserve interest rate hike. Some suggest it has reduced the odds of a July hike as well. S&P 500 stock futures are down about 0.3 per cent. Prior to the data, traders were pricing in a 20 per cent chance of a rate hike in June and a 49 per cent chance of an increase in July, according to CME Group's FedWatch program. Those numbers will be undoubtedly coming down today.

Comments from Fed Governor Lael Brainard later in this morning could have an impact on Fed speculation as well. She is the most dovish of the permanent voting governors. With another noted dove, Chicago Fed President Charles Evans, suggesting two rate hikes this year could be appropriate, Governor Brainard's speech could be seen as the Fed doves' last stand. It would be too much of a leap to expect her to jump on the hawkish bandwagon, but neutral comments similar to those made by FOMC Chair Janet Yellen last Friday would suggest limited opposition to a pending interest rate increase

Markets overseas rose overnight, boosted by generally better-than-expected service Purchasing Managers Index reports. The Nikkei and Hang Seng rose 0.4 per cent, while in Europe, the FTSE is still positive in the wake of the jobs report, but off earlier highs.

Traders are  increasingly discounting cries of impending Brexit doom from people like U.K. "Remain" leaders David Cameron and German Chancellor Angela Merkel as overblown hyperbole amid a very close race.

Commodities were up overnight with copper surging more than 2 per cent per cent and crude oil consolidating Thursday's rebound near $50 for Brent and West Texas intermediate. Service PMI reports indicated an accelerating global economy with Japan, Australia and Singapore all climbing back above 50 - the point that separates expansion from contraction - and China down only marginally. The U.K., Spain and Sweden put up better-than-expected service PMI reports in Europe while Sweden also reported strong industrial production.

Now, here is a closer look at what's going on this morning and what is still to come.

MARKET DATA: (as of 835 a.m. ET)

Futures

Dow -0.21 per cent; S&P 500 -0.40 per cent; Nasdaq: -0.22 per cent

Equities
Japan's Nikkei +0.48 per cent
Shanghai composite index +0.44 per cent
Hong Kong's Hang Seng +0.42 per cent 
Germany's DAX -0.31 per cent
London's FTSE +0.52 per cent
France's CAC 40 -0.22 per cent

Commodities
WTI crude oil (Nymex July) -0.65 per cent at $48.85 (U.S.) a barrel
Gold (Comex Aug) +1.73 per cent at $1,233.00 (U.S.) an ounce
Copper (Comex July) +2.56 per cent at $2.12 (U.S.) a pound

Currencies
Canadian dollar +0.68 at 77.00 cents (U.S.)
U.S. dollar index -0.80 at 94.75

Bonds
Canada 10-year bond yield -0.043 at 1.205 per cent

KEY ECONOMIC RELEASES

Employers in May added the fewest number of workers in almost six years, reflecting broad cutbacks that may raise concern about U.S. growth and prompt Federal Reserve policy makers to put off an increase in interest rates. The addition of 38,000 workers, the fewest since September 2010, followed a 123,000 advance in April that was smaller than previously estimated, a Labor Department report showed Friday. The increase in May was less than the most pessimistic forecast in a Bloomberg survey. The jobless rate dropped to 4.7 per cent, the lowest since November 2007, as Americans left the labor force. The median forecast in a Bloomberg survey of economists called for a 160,000 gain in May employment.

The trade deficit in the U.S. was smaller than forecast in April after revisions for the prior month put the gap at the lowest level in more than two years. The difference between imports and exports increased 5.3 percent to $37.4 billion, lower than any forecast in a Bloomberg survey of economists, from a revised $35.5 billion in March that was the smallest since December 2013, the Commerce Department reported Friday in Washington.

Canada's merchandise trade deficit narrowed in April from March's record. The deficit was $2.94 billion. Economists surveyed by Bloomberg forecast a $2.5 billion shortfall, based on the median of 16 forecasts.

(10 a.m. ET) U.S. factory orders for April. Consensus is an increase of 1.0 per cent from March.
(10 a.m. ET) U.S. non-manufacturing ISM for May. Consensus is 55.3, down from 55.7 in April.
(1 p.m. ET) Baker-Hughes rig count

KEY STOCKS TO WATCH

Valeant Pharmaceuticals International Inc said it received another notice of default from bondholders for the delay in filing its first-quarter report. However, the company reiterated that it would file the report with U.S. and Canadian regulators on or before June 10, ahead of a July 31 deadline.

Ambarella was up 9.5 per cent at $46.50 in the premarket after the chipmaker's quarterly results beat estimates. GoPro , which uses Ambarella's chips in its cameras, was up nearly 4 percent at $11.14.

Talen Energy jumped 18 per cent to $14.10 in the premarket after agreeing to be taken private by Riverstone Holdings for about $1.8 billion.

Earnings include: Piedmont Natural Gas Company Inc.; Sears Hometown and Outlet Stores Inc.

Also see: Friday's small-cap stocks to watch

With files from wire services