U.S. equity futures extended declines Thursday, while the dollar held near six-month highs against its global peers, and renewed inflation concerns continue to blunt stock performance amid the ongoing resilience of the world's biggest economy.
ISM data from the services sector, the most important component to U.S. growth, showed a big jump in August activity that included higher prices paid by company managers and robust hiring plans into the autumn months.
The Federal Reserve's Beige Book reading of economic activity around the various regions, by contrast, showed moderating prospects and slowing wage gains, but still suggested enough potential to mitigate near-term recession concerns despite a recent San Francisco Fed study that suggested rate hikes will act as a drag on economic growth for the better part of a decade.
The hot jobs and price data from the ISM reading triggered a spike in Treasury bond yields Wednesday that added headwinds to U.S. stocks and tipped global markets into a third day of losses in overnight trading.
The Labor Department also published data Thursday that showed another surprise decline in weekly unemployment claims as Wall Street remains laser-focused on the job market.
Around 216,000 people filed new applications for the week ended September 2, the Bureau of Labor Statistics said, compared with the prior tally of 228,000 and the lowest levels since the final week of January. The recent four-week average also slipped lower, to 229,500.
A separate report from the Commerce Department showed unit labor costs for the three months ending in June rose 2.2% from last year, up from an earlier estimate of just 1.2%, even as productivity fell 1.2%.
"We’ve seen this movie before: Weekly jobless claims once again surprise to the downside, underscoring the labor market’s resilience," said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office.
"Yes, the economy has slowed and inflation has cooled, but employment continues to be a thorn in the side of the Fed, which has made softening the jobs market the cornerstone of its inflation battle," he added. "The Fed may be poised to leave interest rates unchanged later this month, but they’re nowhere close to backing away from a higher-for-longer stance."
Benchmark 10-year Treasury note yields were last marked at 4.296% in early New York dealing following the employment data release, with 2-year notes rising above the 5% mark to 5..027%.
The CME Group's FedWatch, meanwhile, is pricing in a 93% chance that the Fed holds its benchmark lending rate steady at between 5.25% and 5.5% when it meets later this month in Washington, with bets on a November rate hike now pegged at 44.5%.
Global oil prices, meanwhile, edged lower in overnight trading ahead of Energy Department data on domestic stockpiles and U.S. production rates later this morning.
Brent crude futures, the global pricing benchmark which has been trading over $90 a barrel for the first time this year following the extension of production cuts by Russia and Saudi Arabia, was marked 6 cents lower at $90.54 per barrel in overnight trading.
WTI futures for October delivery, which are tightly-linked to U.S. gasoline prices, were marked 1 cent lower at $87.53 per barrel.
Heading into the opening hour of the trading day on Wall Street, the S&P 500 was marked 24 points, or 0.53%, lower while the Dow Jones Industrial Average added 22 points. The tech-focused Nasdaq was marked 171 points lower.
In Europe, the region-wide Stoxx 600 looked to snap a three-day losing streak and was marked 0.02% higher in early afternoon trading in Frankfurt, while Britain's FTSE 100 gained 0.37% in London off the back of a weaker pound and firmer energy stocks.
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