Wall Street is on edge as investors navigate a week filled with economic uncertainty. The upcoming Friday’s non-farm payrolls report, a key indicator of the labor market’s health, is casting a shadow over market sentiment, driving index futures to trade narrowly mixed in early trading.
The week’s economic data releases, including weekly jobless claims and service sector readings, will play a crucial role in influencing the direction of the major indices. Positive data could push the market higher, while weaker-than-expected figures could further dampen investor sentiment.
Companies heavily invested in artificial intelligence technology are facing pressure following C3.ai’s disappointing earnings report. However, Nvidia Corp., a major player in the AI sector, is showing modest gains.
Crude oil futures have rebounded, while gold futures have also risen. The CBOE Volatility Index (VIX), often referred to as the ‘fear gauge’, is settling down after its recent spike. Traders are also keeping a close eye on bond yields amid concerns of a potential recession.
In pre-market trading, the SPDR S&P 500 ETF Trust (SPY) edged up by 0.03% to $551.10, while the Invesco QQQ ETF (QQQ) dipped by 0.07% to $460.31.
The previous session saw U.S. stocks close mixed, with economic worries countering any potential gains from bargain hunting following recent market declines. Initial selling pressure emerged after July’s job openings report revealed the lowest number of openings since early 2021. While the major indices initially trimmed losses, they eventually turned negative for much of the session. A late-session buying surge helped the Dow Industrials close in positive territory, but the S&P 500 and Nasdaq Composite indices finished modestly lower.
Energy stocks experienced the most significant decline, with communication services and IT stocks also falling. Consumer staples, real estate, and utility stocks bucked the trend and saw gains.
Amidst this fluid market environment, fund managers are offering mixed perspectives. Louis Navellier, a fund manager, expresses optimism about the equity market’s performance, stating that history suggests a positive end to any month that starts with a 1% correction. However, he acknowledges the continued uncertainty surrounding the Federal Reserve’s (Fed) rate cut.
LPL Financial Portfolio Strategist George Smith emphasizes September’s historically weak performance for stocks, but identifies mitigating factors such as the current interest rate trajectory. He points out that the September Federal Open Market Committee (FOMC) meeting occurs at the start of this typically unfavorable period for stocks. Smith acknowledges the potential for short-term weakness as markets readjust, but forecasts more favorable conditions for stocks in the post-election period and fourth quarter.
Today’s economic data releases will provide further insights into the state of the economy. The Labor Department’s weekly jobless claims report is expected to show a slight decline in the number of individuals claiming unemployment benefits. The revised second-quarter non-farm productivity and costs report is also scheduled for release, with an anticipated upward revision in productivity growth.
The final service sector purchasing managers’ index (PMI) from S&P Global and the non-manufacturing PMI from the Institute for Supply Management are expected to provide additional information on the health of the service sector.
In the energy sector, crude oil futures have rebounded, but remain below the $70-a-barrel level. Gold futures are also advancing. Bitcoin is showing modest gains, trading closer to the $57,000 mark. The yield on the 10-year Treasury note remains unchanged at 3.768%.
Asian markets experienced a mixed day, with the Japanese market under pressure from the yen’s continued strength. However, some major Asian markets were encouraged by Wall Street’s late-session rally. European stocks are trading mostly lower in early trading.
As investors navigate this week of heightened volatility, the focus remains on the key economic data releases and the potential impact on the Fed’s future rate decisions. The markets will continue to react to these events, with the potential for further fluctuations in the coming days.
