(Bloomberg) — Stocks whipsawed ahead of U.S. jobs data that will be key to determining the size of the Federal Reserve’s rate cut in September.
Most Read from Bloomberg
In a session of several twists and turns, the S&P 500 finished lower. This is despite a rally in some big tech. Treasury yields fell slightly, with traders still pricing in more than 100 basis points on Fed easing this year – which has led to a potential super size reduction. Given Jerome Powell’s new emphasis on the labor market, many on Wall Street said there are US payrolls will dictate whether the Fed cuts by 25 or 50 basis points this month.
For Steve Sosnick at Interactive Brokers, a “Goldilocks” scenario of consensus – ‘not too hot, not too cold’ – is what equity bulls need.
“The danger in the true ‘bad news’ is that even if the Fed is ready to react aggressively, it may be too late to stave off the real weakness of the economy,” he said. “But there are concerns that if the news is ‘too good,’ the Fed may not be able to cut rates as quickly as the market expects.”
During these figures, the economic data is mixed. US services expanded rapidly, companies added the fewest jobs since early 2021, while jobless claims beat estimates.
“After today’s mixed numbers, it’s up to tomorrow’s jobs report to give investors a clearer read on labor market conditions,” said Chris Larkin at Morgan Stanley’s E*Trade. “The market is still trying to figure out if the economy is slowing down too much, and whether the Fed is behind the curve.”
The S&P 500 fell 0.3%. The Nasdaq 100 was little changed. The Dow Jones Industrial Average fell 0.5%. A gauge of megacaps “Magnificent Seven” increased by 1.6%. The Russell 2000 declined 0.6%. The US 10-year yield fell three basis points to 3.73%. The dollar jumped.
In corporate news, Nvidia Corp climbed, with Bank of America Corp analysts saying the new plunge creates a buying opportunity. Tesla Inc jumped on plans to launch driver assistants in China and Europe. At the end of the hour, Broadcom Inc. slumped in the summer forecast.
After last month’s disappointing jobs report, it’s no surprise that investors were “skittish” ahead of Friday’s data, according to Bret Kenwell at eToro.
“While the odds are now in favor of a 25-basis-point cut at the Fed’s September meeting, a disappointing jobs report could shift those odds to a 50-basis-point cut,” he said. “If the Fed feels compelled to move to a 50 basis point cut, there may be more concern about the job market than previously acknowledged.”
Kenwell said that ideally, we should see a “better than feared” report on Friday, which would point to a slightly softer — but not strong — labor market and allow the Fed to make a series of 25 basis points. cut rates.
For Andrew Brenner at NatAlliance Securities, if the economy shows strength in nonfarm payrolls, equities should be better at first – but if rates “get slaughtered,” that won’t be good. Conversely, if rates rally due to low numbers, this also does not bode well for the stock.
“So we’re in the tail where we’re losing, we’re losing our head,” Brenner said.
The jobs report is expected to show payrolls increased by about 165,000, based on the median estimate in a Bloomberg survey of economists. While it topped the 114,000 gain in July, the average growth over the most recent three months will be less than 150,000 – the smallest since the start of 2021.
A survey conducted by 22V Research shows most investors (44%) think the market’s reaction to Friday’s data will be “risky”, 27% say “risky” and 29% “negligible/mixed.”
The tally also highlighted a significant change – with the unemployment rate gaining more attention this month. Meanwhile, the focus on wage growth has dropped further. And 52% of respondents expect salaries to beat the 165,000 projection.
For Stan Shipley at Evercore, Thursday’s ADP private employment count and other labor market metrics suggest “soft wages” for August.
“Tomorrow’s payroll report could be softer than expected due to lower ADP estimates” said Jeffrey Roach at LPL Financial. “If the payrolls report surprises investors and is weaker than expected, the chances of a 50 basis point cut increase at the upcoming Fed meeting.”
While the ADP report has been a poor prognosticator of non-farm payrolls in recent years, the correlation to print has improved this year.
Company Highlights:
-
JetBlue Airways Corp raised its sales forecast for the current quarter after the carrier said it benefited from passenger rebookings from rival airlines whose flights were disrupted by technology disruptions in July.
-
Verizon Communications Inc., which agreed to buy Frontier Communications Parent Inc. for about $9.59 billion in cash, said it is focusing on paying down debt as it works to close the deal.
-
Paramount Global, the parent of CBS, will be controlled by software billionaire Larry Ellison after a group led by his son David completes the purchase of the Redstone family’s interest in the film and TV company, according to a regulatory filing.
This week’s highlights:
-
Euro Zone GDP, Friday
-
US nonfarm payrolls, Friday
-
Fed’s John Williams said, there
Some of the main movements in the market:
Savings
-
The S&P 500 fell 0.3% at 4 p.m. New York time
-
The Nasdaq 100 was little changed
-
Dow Jones Industrial Average down 0.5%
-
MSCI World Index down 0.3%
-
Bloomberg Magnificent 7 Total Return Index rose 1.6%
-
Russell 2000 index down 0.6%
currency
-
Bloomberg Dollar Spot Index down 0.2%
-
The euro rose 0.2% to $1.1105
-
The British pound rose 0.2% to $1.3171
-
The Japanese yen rose 0.2% to 143.45 per dollar
Cryptocurrencies
-
Bitcoin fell 3.4% to $56,090.69
-
Ether fell 3.6% to $2,365.8
Bond
-
The yield on 10-year Treasuries fell three basis points to 3.73%
-
Germany’s 10-year yield fell two basis points to 2.21%
-
The UK 10-year yield fell two basis points to 3.91%
Commodity
-
West Texas Intermediate crude was unchanged
-
Spot gold rose 0.8% to $2,515.75 an ounce
This story was produced with the help of Bloomberg Automation.
Most Read from Bloomberg Businessweek
© 2024 Bloomberg LP