Markets Tread Carefully Ahead of Jobs Data as Defense Stocks Rally on Budget Talk

U.S. stock futures edged lower early Thursday as investors tightened positions ahead of a critical stretch of economic data, culminating in Friday’s nonfarm payrolls report. With markets hovering near record highs and interest-rate expectations on edge, traders appeared reluctant to take on fresh risk. At the same time, defense stocks surged after President Donald Trump signaled a significantly larger U.S. military budget in the years ahead.

As of 5:08 a.m. ET, Dow futures were down 146 points, or 0.30%. S&P 500 futures slipped 0.22%, while Nasdaq 100 futures fell 0.31%, pointing to a cautious start for Wall Street.

One pocket of the market stood out sharply from the broader hesitation: defense contractors. Shares of Lockheed Martin jumped 7.2%, Northrop Grumman rose 7.5%, and RTX gained 4.9% after Trump suggested the U.S. military budget for 2027 should reach $1.5 trillion. That figure would mark a dramatic increase from the $901 billion Congress approved for 2026.

The comments immediately reignited expectations of stronger long-term defense spending, lifting sentiment across the sector even as the broader market pulled back.

The cautious tone elsewhere reflects how sensitive markets have become to the labor picture. Recent data have painted a mixed and uneven outlook. Job openings fell by 303,000 in November to 7.146 million, while hiring slowed again, reinforcing what policymakers have described as a “no hire, no fire” labor market.

Barclays Chief Economist Marc Giannoni pointed to the decline in job openings as a notable signal of cooling momentum. That concern was echoed by a separate ADP report, which showed private payrolls rising by just 41,000 in December—well below expectations.

All eyes now turn to Friday’s official payrolls report, due at 8:30 a.m. ET before the opening bell. The release often drives sharp moves in Treasury yields and equity futures, especially in the first hour of trading. A stronger-than-expected reading could push yields higher and pressure growth stocks, while a weaker print might ease rate fears but raise fresh concerns about demand and corporate profits.

Thursday’s data lineup adds to the tension. Weekly jobless claims, international trade figures, and the productivity-and-costs report are all scheduled for release at 8:30 a.m. ET. Wholesale inventories follow at 10:00 a.m. ET, with consumer credit data due later in the afternoon.

Economists surveyed by Investing.com expect initial jobless claims of 213,000, nonfarm productivity growth of 4.9%, and flat unit labor costs. Any surprise in these numbers could quickly shift market sentiment.

Heading into the data, financial conditions remained relatively calm. The 10-year Treasury yield hovered around 4.16%, oil prices were higher with U.S. crude up about 1% near $56.60 a barrel, and the dollar index ticked modestly higher.

Still, that calm could prove fragile. A sudden jump in jobless claims, an unexpected rise in labor costs, or another round of policy-driven headlines could unsettle markets and amplify moves that have so far remained orderly this week.

With payrolls just a day away, investors appear content to wait—knowing the next clear signal on the economy and interest rates may soon force a decisive shift in positioning.