Futures muted after jobs data raises odds of more rate hikes

(Reuters) – U.S. stock index futures were mixed on Monday, as traders returned from Easter break to growing risks that the Federal Reserve will continue to hike interest rates after Friday’s jobs data highlighted a still-strong labor market.

Futures tracking the tech-heavy Nasdaq 100 led modest losses on Wall Street, with shares of growth stocks Apple Inc, Inc, Microsoft Corp slipping in early premarket trade.

U.S. employers maintained a strong pace of hiring in March, data released on Friday showed, pushing the unemployment rate down to 3.5% and raising odds of the Fed hiking rates one more time next month.

While nonfarm payrolls increased by 236,000 jobs last month, slightly weaker than economists’ expectations, investors focused on the overall data which signaled labor market resilience.

“We see a disconnect between markets presuming much easier Fed policy on “softer” data and how the Fed will actually see the data,” Citi economists said in a note.

“Not only should high inflation and a still-strong labor market keep cuts unlikely, but we see persistently too-strong inflation, including a 0.5% MoM increase in core CPI this week, as leading to further hikes.”

Citi expects three 25 basis point rate hikes at the coming Fed meetings with a policy rate reaching 5.50-5.75%.

While U.S. stock markets were closed for Good Friday, Treasury yields surged after the data, with the two-year yield, which typically moves in step with rate expectations, jumping to 3.993% on Friday. It was last down at 3.9306%. [US/]

Focus this week will shift to U.S. consumer prices data, the Fed’s meeting minutes as well as first-quarter results from big U.S. banks, including JPMorgan Chase & Co, Citigroup Inc and Wells Fargo & Co.

Analysts expect profits for S&P 500 companies to shrink 5.2% in the first-quarter, as per Refinitiv IBES estimates, a reversal from 1.4% growth forecast at the start of the year.

At 05:03 a.m. ET, Dow e-minis were up 12 points, or 0.04%, S&P 500 e-minis remained unchanged, and Nasdaq 100 e-minis were down 31.75 points, or 0.24%.

First Republic Bank’s shares slipped 1.4% after the lender said it will suspend payments of quarterly cash dividends on its preferred stock “as a measure of prudent oversight.”

Shares of other regional banks were also weaker after Fed data released on Friday showed deposits at U.S. commercial banks rose near the end of March for the first time in about a month, showing signs of stabilizing after the recent bank failures rocked the banking system and rattled depositors.

Western Alliance Bancorporation slipped 0.8%, while PacWest Bancorp was down 0.6%.

(Reporting by Sruthi Shankar in Bengaluru; additional reporting by Medha Singh; Editing by Varun H K)

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