-- Markets are focused on the release of the monthly nonfarm payrolls data on Friday, which could shed some light on the state of U.S. labor demand and influence how the Federal Reserve approaches upcoming interest rate decisions. Fed Chair Jerome Powell, meanwhile, says policymakers are "not far" from having the confidence that inflation is sustainably easing, fueling hopes for rate cuts this year. Elsewhere, Costco's (NASDAQ:) quarterly revenue disappoints as customers shy away from spending on pricier items.

1. U.S. jobs report ahead

The monthly labor market report is due to headline the economic calendar on Friday, with economists predicting that the U.S. economy added jobs at a slower pace in February.

Nonfarm payrolls are estimated to have risen by 198,000, down from 353,000 in January. Meanwhile, average hourly wage growth is expected to cooled to 0.2% from 0.6% versus the prior month and the unemployment rate is seen matching the previous reading of 3.7%.

Investors and policymakers at the Federal Reserve will likely be keeing close tabs on the figures. Signs of easing labor demand -- and, in theory, cooling upward pressure on inflation from wage growth -- could give the Fed more headroom to begin ratcheting down borrowing costs from more than two-decade highs later this year. 

Earlier this week, private payrolls, job openings and unemployment claims seemed to indicate that the labor picture in the world's largest economy is solid but softening.

2. Futures muted prior to labor market data

U.S. stock market futures were subdued in the build-up to the nonfarm payrolls report on Friday.

By 03:34 ET (08:34 GMT), the contract had added 0.1%, were mostly unchanged, and had dipped by 0.1%.

The main averages advanced in the prior session. Chip stocks, which are seen as major beneficiaries of a boom in demand for artificial intelligence, surged in particular, with the Philadelphia Semiconductor index finishing at a record high. Fed Chair Jerome Powell's testimony to a Senate committee also spurred on hopes for interest rate cuts, further boosting equities.

At the close of trading on Thursday, the benchmark had gained 1.0%, the tech-heavy had climbed by 1.5%, and the blue-chip had added 0.3%.

3. Powell says Fed "not far" from being confident in inflation path

Powell used a second day of testimony on Capitol Hill this week to call for patience and caution on the outlook for U.S. inflation.

But, crucially, he noted that the Fed is "not far" from having the confidence it needs that price gains are sustainably moving down towards its stated 2% target.

"When we do get that confidence [...] it will be appropriate to begin to dial back the level of restriction so that we don’t drive the economy into recession,” Powell noted.

The comments were interpreted as an indication that rate cuts remain likely this year. Markets, who started off 2024 expecting a reduction some time in the spring, have since had to push back those bets. According to CME Group's (NASDAQ:) closely-monitored FedWatch Tool, the Fed is not anticipated to slash rates until its June meeting.

"Now that markets have been handed a relatively dovish guideline by Powell, the focus turns back to data," analysts at ING said in a note.

4. Costco shares dip after revenue misses estimates

Costco reported second-quarter revenue that missed expectations as demand for higher-priced items was dented by a more cost-conscious consumer.

Shoppers, weighed down by high inflation and elevated interest rates, have recently moved to dial back spending on big-ticket items like electronics and furniture. Costco, which specializes in selling essential goods in bulk, has been somewhat immune to this slowdown.

However, the firm said a shift in the fiscal calendar and a decrease in gasoline prices have hit its returns. Total quarterly revenue edged up by 6% to $58.44 billion in the three months ended on Feb. 19, but were below estimates of $59.16 billion, according to LSEG data cited by Reuters.

Shares in Costco fell in premarket U.S. trading.

5. Crude inches higher

Oil prices rose Friday, boosted by signs of growing demand in China and the U.S., the two largest economies in the world.

By 03:35 ET, the futures traded 1.1% higher at $79.80 a barrel, while the contract climbed 0.8% to $83.66 per barrel.

Data from the Energy Information Administration, released earlier this week, showed that U.S. gasoline inventories fell 4.5 million barrels last week, in a sign of a healthy demand before the start of the U.S. driving season.

Additionally, Chinese imports of crude oil increased by 5.1% in the first two months of 2024 from a year earlier.