The financial markets are holding their breath as they await the release of the all-important September jobs report, which is expected to provide crucial insights into the direction of the U.S. economy. Traders are cautiously optimistic, with the index futures narrowly mixed in early Friday trading.
The suspension of the Longshoremen’s strike, which had been a major overhang on sentiment, has brought a sense of relief. However, ongoing geopolitical tensions in the Middle East continue to cast a shadow over the market.
The September jobs gains could have a significant impact on the near-term direction of the market, particularly as investors are increasingly focused on the Federal Reserve’s stance on interest rates. “Payroll data will be closely watched as the sentiment is now that the Fed has become less focused on inflation and more on employment,” noted fund manager Louis Navellier.
A BofA note highlighted the sensitivity of the S&P 500 futures to non-farm payroll data, suggesting it has been more reactive to this economic indicator than any other in recent years.
In premarket trading on Friday, the SPDR S&P 500 ETF Trust (SPY) gained 0.16% to $568.75, and the Invesco QQQ ETF (QQQ) moved 0.32% higher to $483.14, according to Benzinga Pro data.
A Look Back at Thursday’s Market Action
U.S. stocks exhibited nervousness throughout Thursday’s session before closing lower, with geopolitical tensions, the dockworkers’ strike, and mixed economic data weighing down on sentiment. While a bigger-than-expected increase in jobless claims stirred anxiety about the monthly jobs data, the Institute for Supply Management’s stronger-than-expected service sector purchasing managers’ index tempered expectations concerning a bigger cut.
The Nasdaq Composite oscillated back and forth in the morning session but languished mostly below the unchanged line in the afternoon before ending marginally lower, despite moderate gains in IT and communication services. The broader S&P 500 Index traded mostly in the red and ended modestly lower, with consumer discretionary, consumer staple, healthcare, material, and real estate stocks dragging the index lower. On the other hand, energy stocks posted solid gains. The index settled at a two-week low. The 30-stock Dow Jones Industrial Average underperformed, settling down 0.44% at a one-week low.
Analysts Weigh In
Comerica Chief Economist Bill Adams expects the Fed to cut rates by 25 basis points in November, December, January, and March, and then move toward quarterly rate cuts for the rest of the next year. He noted that inflation is slowing to near the Fed’s 2% target, largely due to lower energy prices. Core inflation, though higher than the headline inflation, could slow due to downward pressure on durable goods and used autos persisting, and a slower increase in housing costs. Adams sees the Fed funds rate to be in the range of 3%-3.25% by the end of 2025. However, he does not rule out a faster pace of rate cuts if the economy weakens materially, or a slower rate cut if the large deficit or wars in oil-exporting regions cause inflation to rebound.
Navellier, in a note sent to clients on Thursday, expressed optimism about the near-term trajectory of the market. “Funds flows into equities are likely to remain positive, at least until there is a sustained pullback, which hasn’t happened since ’22,” he said. The fund manager highlighted the boost the AI theme received after OpenAI’s new funding round, which raised $6.6 billion from a long list of well-known investors, valuing the company at $157 billion. Also, Nvidia Corp.’s (NVDA) CEO Jensen Huang’s comments that demand for the company’s new Blackwell chips is “insane” is a positive for the sector.
“AI adoption remains one of the fastest-growing new technologies ever and continues to promise big gains in productivity, though the timing of meaningful cash flow gains still remains uncertain,” Navellier added.
Upcoming Economic Data and Stocks to Watch
The Bureau of Labor Statistics is due to release its September non-farm payrolls report at 8:30 a.m. EDT. Economists, on average, expect job gains of 150,000, up from the 142,000 rate in August. The jobless claims are expected to stay put at 4.2%, and the average hourly wages may have risen at a steady annual pace of 3.8%.
New York Fed President John Williams is scheduled to give opening remarks at the conference “The Future of New York City: Focus on Jobs,” at 9 a.m. EDT. Chicago Fed President Austan Goolsbee will make a TV appearance at 10 a.m. EDT.
Stocks In Focus
Spirit Airlines, Inc. (SAVE) plunged over 37% after reports said the low-cost carrier is exploring a Chapter 11 bankruptcy filing following its failed attempt to merge with JetBlue Airways Corporation (JBLU). JetBlue climbed over 5%.
Apogee Enterprises, Inc. (APOG) is scheduled to announce its quarterly results before the market opens.
Commodities, Bonds, and Global Equity Markets
Crude oil futures added to their 5%+ gains from Thursday and traded above $74.50, and gold futures traded flat under their all-time high. Bitcoin (BTC/USD) climbed over 1% ahead of the jobs data. The yield on the 10-year Treasury note remained unchanged at 3.85%.
The Asian markets were mixed, with Japan ending modestly higher, and Hong Kong and a few other majors advancing. On the other hand, the Indian, Australian, Malaysian, Indonesian, and Taiwanese markets retreated. The Chinese market continued to remain closed for a weeklong holiday. In Europe, sentiment is modestly positive in early trading, although the U.K. market is retreating.
