TLDR:
- US stock futures fell ahead of critical jobs data
- Nasdaq 100 contracts down over 1%, S&P 500 heading for 4th day of declines
- Traders anticipate potential Fed rate cut later this month
- European stocks heading for biggest weekly decline in almost a year
- Oil poised for biggest weekly loss in almost a year on demand concerns
The US stock market is holding its breath as it awaits the release of crucial jobs data that could significantly influence the Federal Reserve’s decision on interest rates later this month.
With mixed economic signals throughout the week, investors are closely watching for signs that might indicate whether the US economy is heading for a soft landing or a recession.
Market Movements
US stock futures fell in anticipation of the jobs report, with Nasdaq 100 contracts down more than 1% and the S&P 500 on track for its fourth consecutive day of declines.
Nvidia Corp., a bellwether for the tech sector, dropped 2.2% in premarket trading, dragged down by disappointing guidance from Broadcom Inc.
The US dollar retreated for the third day in a row, reflecting growing expectations that weaker-than-expected monthly payroll data could trigger a significant cut in interest rates. The yield on 10-year Treasuries also dropped by three basis points to 3.7%.
Jobs Data and Fed Speculation
Economists predict that August’s report will show a rebound in hiring and a slight decrease in the unemployment rate, potentially indicating a stabilization after July’s figures.
The consensus estimate suggests payrolls likely rose by 165,000 last month, following July’s increase of 114,000. The unemployment rate is expected to edge down to 4.2%.
This data is crucial for Federal Reserve policymakers as they gauge the health of the US economy. Swap traders are fully pricing in a 25 basis point cut when Fed officials meet in two weeks, with about a 35% chance of a more substantial 50 basis point reduction.
Global Market Context
The anticipation of the US jobs report is having ripple effects across global markets. In Europe, the region’s stock benchmark is heading for its most significant weekly decline in almost a year. However, there was some positive news as a key measure of euro-zone wage growth eased, providing reassurance to European Central Bank officials considering lowering interest rates next week.
In currency markets, the Japanese yen strengthened against the dollar, trading below 143. Currency strategists suggest that the yen could test its August high versus the dollar if the payrolls data increases the likelihood of a 50 basis point rate cut.
Commodity markets are also feeling the effects of economic uncertainty. Oil is on track for its biggest weekly loss in almost a year due to concerns about soft demand and ample supply, despite OPEC+ delaying a planned increase in output. Similarly, iron ore is heading for its worst week since March, with few signs of recovery in China’s steel market.
As markets brace for the jobs report, volatility is expected to continue. Investors are advised to prepare for potential market swings as the economy transitions from a rate-hike cycle to a potential rate-cut cycle.
The coming weeks will be crucial in determining the trajectory of the US economy and the Federal Reserve’s monetary policy for the remainder of the year.
