Wall St Eyes Lower Open As Labor Data Fans Rate Hike Fears

Wall Street's main indexes were set to open lower on Thursday after further evidence of a strong labor market spurred worries that the Federal Reserve could keep raising interest rates for longer than expected.

The ADP National Employment report showed private employment rose by 235,000 jobs in December, after rising by 127,000 jobs in November. Economists polled by Reuters had forecast an increase of 150,000 jobs.

"The ADP report is causing investors to be on the defensive again regarding the Fed and that it might indeed need to be raising interest rates longer and higher than the market is currently anticipating," said Sam Stovall, chief investment strategist at CFRA Research, New York.

Another report showed the number of Americans filing new claims for unemployment benefits fell last week from the prior week.

Both the reports come a day after data showed a moderate fall in U.S. job openings, adding to evidence that the labor market remains tight.

The labor market's resilience has been a cause of concern for markets as it could give the Fed reason to keep raising rates for longer than expected this year, after the central bank's aggressive tightening pummeled U.S. equities in 2022.

Wall Street's main indexes erased some of their gains on Wednesday after minutes from the Fed's December meeting showed the central bank was laser-focused on fighting inflation even as officials agreed to slow the interest rate hiking pace to limit risks to economic growth.

After Minneapolis Fed President Neel Kashkari on Wednesday stressed the need for continued tightening, investors will be watching out for comments from Atlanta Federal Reserve President Raphael Bostic and St. Louis Fed President James Bullard later on Thursday.

Money market participants now expect a 58.4% chance of a 25-basis point rate hike to 4.50%-4.75% in February, but still see rates peaking at about 5% by June.

The more comprehensive nonfarm payrolls report is due on Friday, with investors hoping to see signs of cooling in the labor market that could give the Fed some reason to slow its monetary tightening.

At 8:35 a.m. ET, Dow e-minis were down 170 points, or 0.51%, S&P 500 e-minis were down 20.25 points, or 0.52%, and Nasdaq 100 e-minis were down 62.25 points, or 0.57%.

Shares of Amazon.com Inc rose nearly 1% in premarket trading after Chief Executive Andy Jassy said layoffs will now increase to more than 18,000 roles as part of a workforce reduction it previously disclosed.

Walgreens Boots Alliance Inc fell 4.8% after the drugstore chain posted a quarterly loss on an opioid litigation charge.

Bed Bath & Beyond Inc dropped 18.3% after the company said it was exploring options including a bankruptcy filing to address the home goods retailer's plunging sales, dwindling cash and debt load.