Stock futures searched for direction Friday morning on the heels of a key labor market report, which reflected a stronger than expected rebound in employment last month and a marked drop in the jobless rate. 

Contracts on the S&P 500 were flat to up slightly. The blue-chip index closed at a record high on Thursday, shaking off declines from a day earlier. The Dow and Nasdaq also ended in positive territory. 

For investors, all eyes on Friday were fixed fixed on the Labor Department's July jobs report. The print showed a whopping 943,000 jobs came back last month as the unemployment rate fell to the lowest level since March 2020. The report also showed upward revisions to the past two months' payroll gains. 

But with the Delta variant running rampant across the U.S. and other constraints to the labor market still at play, many pundits have suggested the economy is not fully in the clear yet. Just earlier this week, ADP's closely watched print on private payrolls registered as a sharp disappointment, with only 330,000 jobs coming back versus the nearly 700,000 expected. While the ADP report has historically not tracked perfectly with the Labor Department's "official" monthly jobs reports, it has tended to be a good directional indicator of trends in the labor market. 

And for equity investors, some moderation in the labor market's recovery may have been perceived as the more desirable outcome. 

“The market actually wants a bad jobs report, perverse as that sounds,” Opimas CEO Octavio Marenzi, told Yahoo Finance Thursday afternoon, adding it wants “the job numbers to come in weak so the Fed has a reason to continue its monetary policy.” 

Namely, the Federal Reserve has suggested it was looking for more progress in the economic recovery before moving to announce or actually implement changes to its highly accommodative policies. Earlier this week, Federal Reserve Governor Christopher Waller said that he would support announcing tapering of the central bank's crisis-era bond purchases by September if the next couple jobs report come in strongly. Likewise, Federal Reserve Vice Chair Richard Clarida said he would back an interest rate increase in 2023 if the economic recovery continues on its current trajectory.

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Other economists suggested this month's jobs report would be only a backwards-looking indicator given the deceleration in growth occurring as a result of the latest wave of virus concerns. 

"July is a seasonally bad time for state and local government employment as the school year ends but since the layoffs were front loaded, there is a chance the seasonal factor makes an outsize contribution for this area of public sector employment," Neil Dutta, head of macro research at Renaissance Macro Research, wrote in an email on Thursday. "I think the broader story is that even if July is strong, it won't matter because no one should expect a repeat performance in August with economic confidence waning due to the rise in COVID hospitalizations in parts of the country." 

7:11 a.m. ET Friday: Stock futures trade mixed 

Here's where markets were trading Friday morning:

  • S&P 500 futures (ES=F): +1.75 points (+0.04%) at 4,423.25

  • Dow futures (YM=F): +25 points (+0.07%) to 34,968.00

  • Nasdaq futures (NQ=F): -17.75 points (-0.12%) to 15,150.00

  • Crude (CL=F): +$0.99 (+1.3%) to $69.99 a barrel

  • Gold (GC=F): -$12.50 (-0.69%) to $1,796.40 per ounce

  • 10-year Treasury (^TNX): +4.1 bps to yield 1.258%

6:10 p.m. ET Thursday: Stock futures hug the flat line before jobs report 

Here's where markets were trading Thursday evening: 

  • S&P 500 futures (ES=F): -1.75 points (-0.04%) at 4,419.75

  • Dow futures (YM=F): -19 points (-0.05%) to 34,924.00

  • Nasdaq futures (NQ=F): -2 points (-0.01%) to 15,165.75

Traders gather at a post on the floor of the New York Stock Exchange, Tuesday, Aug. 3, 2021. Stocks are off to a mixed start on Wall Street as traders weigh another big set of company earnings reports, which have been coming in largely ahead of analysts’ forecasts. (AP Photo/Richard Drew)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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