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Investing.com — The monthly payrolls report is the highlight of the day’s activity, as investors look for more clues as to when the Federal Reserve will start cutting interest rates. Nvidia remains in the spotlight, although short positions in the AI giant are rising, while volatility in meme stock GameStop is set to continue. .
1. Nonfarm payrolls in spotlight
The day’s highlight will be the closely watched U.S. report, which could provide clues on the timing of Federal Reserve interest rate cuts.
Expectations are for the world’s largest economy to have added 185,000 jobs last month – slightly more than April’s 175,000, which was the smallest gain in half a year. The is expected to have remained below 4% for the 28th straight month.
That said, a slew of economic data this week have pointed to an easing of labor market conditions, creating the possibility of a downside surprise.
Investors had been worried that an overly strong economy might prevent the U.S. Federal Reserve from lowering rates this year at all. But those concerns have been, at least partly, alleviated by data showing slowing inflation as well as a cooling labor market.
The employment report could prove the economy is losing steam if it shows the slowdown in job creation has continued, but an upside surprise could deliver a nasty shock to markets.
The meets next week, but is not expected to cut interest rates at that point. Markets currently price in 50 basis points of cuts by end-December, with the first cut most likely coming in September.
2. Futures just higher ahead of jobs report
U.S. stock futures traded marginally higher Friday, with investors wary of taking hefty positions ahead of the release of the key monthly jobs report.
By 04:00 ET (08:00 GMT), the contract was 35 points, or 0.1%, higher, climbed 3 points, or 0.1%, and rose by 23 points, or 0.1%.
The main Wall Street indices are all on course for a winning week. The stands 0.5% higher, the is gaining 1.4%, while the is on pace for a 2.6% advance.
The main focus will be the nonfarm payrolls report [see above], as investors look for further evidence of a slowing economy that may support interest rate cuts from the Federal Reserve.
The Federal Reserve meets next week to discuss monetary policy, and this report comes a day after the cut rates for the first time since 2019.
3. Short positions on Nvidia soar
Nvidia (NASDAQ:) has been a major beneficiary of a spike in enthusiasm around the applications of AI, with its stock more than trebling over the last year, culminating in its market capitalization surging past $3 trillion on Wednesday.
Demand for its AI-optimized chips has soared over much of the last year, as more businesses spend heavily to fold the nascent technology into their operations.
However, there has also been a sharp rise in short positions on Nvidia’s stock as it overtook Apple (NASDAQ:) as the second-most valuable company on Wall Street.
Data from S3 Partners showed the notional value of short positions on Nvidia rose to $34.4 billion this week, representing about 1% of the firm’s overall market capitalization.
Nvidia is the “largest short in the U.S. market,” S3 Partners Managing Director Ihor Dusaniwsky said in an interview with Yahoo Finance.
4. GameStop volatility to continue
The volatility in GameStop (NYSE:) trading is set to continue Friday, after the online stock influencer known as „Roaring Kitty” posted on YouTube that he would host a livestream later in the session.
The struggling videogame retailer surged 20% on Monday after the influencer’s – Keith Gill is his real name – Reddit profile returned with a post showing a $116 million bet on the stock after a three-year gap.
Gill was a key player in the 2021 rally of so-called meme stocks, including GameStop, that was fueled by individual investors on Reddit’s wallstreetbets forum.
GameStop stock surged nearly 50% on Thursday, and gained a further 30% in after hours trading.
5. Crude set for hefty weekly losses
Crude prices traded largely flat Friday, and are on course for a third straight week of declines on concerns over rising supply.
By 03:55 ET, the futures traded largely unchanged at $75.55 a barrel, while the contract dropped 0.1% to $79.84 per barrel.
Saudi Energy Minister Prince Abdulaziz bin Salman tried on Thursday to address concerns that the Organization of Petroleum Exporting Countries and allies, known as OPEC+, could lift output levels later this year.
He said the group can pause or reverse voluntary output increases if it decides the market is not strong enough.
However, the crude benchmarks are still on track for weekly losses of around 2% in the wake of last weekend’s OPEC+ meeting.
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