Stock futures struggle to make headway as traders turn attention to jobs data

What’s driving markets

Stocks were on course for a muted start in June, but with support provided by easing debt-ceiling angst, better China data and hopes official U.S. interest rates would not rise this month.

The U.S. House of Representatives voted 314-117 in favor of a crucial debt-ceiling bill on Wednesday night, keeping Washington on track to avoid a technical default by June 5th.

There was no great relief bounce in futures, however. The S&P 500 sits just shy of 10-month highs suggesting many investors were not pricing in the default scenario.

Here’s the Twitter-take from Mohamed El-Erian, adviser to Allianz and Grammercy:

As El-Erian noted, the market was also parsing latest comments from Fedspeakers which implied the central bank should not raise interest rates in less than two weeks time.

The chances of a 25 basis point rate hike by the Fed to a range of 5.25% to 5.5% on June 14 has fallen from 67% on Wednesday to 36% on Thursday. Stocks generally benefit from signs of steadier or falling borrowing costs.

Crucial to the Fed’s deliberations will be the health of the labor market, and so traders will be keen to see the ADP private-sector employment report due 8:15 a.m. and the weekly initial jobless claims data at 8:30 a.m. on Thursday, and the nonfarm payrolls report on Friday.

Other data due Thursday include the S&P U.S. manufacturing PMI for May at 9:45 a.m.; the May ISM manufacturing report at 10 a.m.; and April construction spending at 10 a.m.. All times Eastern.

And there was also better news on China’s economy. Stocks and industrial commodities faced pressure on Wednesday after data showed China’s manufacturing sector contracting further in May.

But the Caixin survey of smaller manufacturers released Thursday showed the sector expanding slightly in May, better than expected. Copper
HG00,
+1.68%
and oil prices
CL.1,
+0.25%
were higher in response.

Suppressing the market optimism were signs that some of the AI exuberance that this week helped power the tech-heavy Nasdaq 100 to a near 14-month high was fading.

Shares of C3.ai Inc., owner of the doubtless coveted ticker
AI,
-8.96%,
were slumping 20% in premarket action after delivering disappointing revenue guidance following Wednesday’s closing bell.