Wall Street is poised for a volatile Friday, with traders anxiously awaiting the release of the August non-farm payrolls data, a key indicator of the U.S. economy’s health. The index futures are currently pointing towards a negative opening, reflecting the market’s cautious sentiment. However, a positive surprise, with job gains meeting or exceeding expectations, could quickly shift the mood.
The data will be followed by speeches from two Federal Reserve officials, potentially the last before the September 17-18 Federal Open Market Committee Meeting, as the blackout period begins on Saturday. This makes the data release even more significant, as it could provide insights into the Fed’s thinking on interest rate policy.
The market direction hinges on which concern dominates – a slowing economy or the potential trajectory of interest rates. A significant disappointment in job gains, echoing the recent weak ADP private payrolls report, could increase the likelihood of a 50 basis point interest rate hike. However, the market’s reaction to a weak job market remains uncertain.
The CBOE Volatility Index (VIX), a measure of market fear, spiked over 13% on Thursday, reflecting the heightened uncertainty. Meanwhile, Broadcom Corp.’s (AVGO) soft guidance for the fourth quarter has weighed heavily on the chipmaker’s stock and its peers.
In pre-market trading on Friday, the SPDR S&P 500 ETF Trust (SPY) slumped 0.61% to $546.24, while the Invesco QQQ ETF (QQQ) dropped 1.05% to $456.21.
Thursday’s Market Recap:
U.S. stocks traded in a lackluster manner on Thursday, as traders grappled with the mixed economic data. A weak ADP private payrolls number and better-than-expected service sector activity readings left the market uncertain. The major indices recovered from a negative open to rise in the morning session, only to be dragged lower again by concerns about Friday’s payroll numbers.
The Nasdaq Composite ended the day higher, snapping a two-session losing streak, while the S&P 500 finished with a modest loss. The Dow Jones Industrial Average and the Russell 2,000 Index closed slightly lower.
Eight of the 11 S&P 500 sectors finished in the red, with industrial, material, healthcare, and financial stocks experiencing notable weakness. On the other hand, consumer discretionary, communication services, and IT stocks saw some buying interest.
Analyst Insights:
Following a turbulent August for stocks, September has started off in line with its reputation as a seasonally weak month. Adam Turnquist, LPL Financial’s Chief Technical Strategist, cautions that the short-term outlook remains uncertain. He notes that the S&P 500’s recovery has stalled just below its record highs reached in mid-July, finding resistance around its 20- and 50-day simple moving averages. Turnquist highlights a price gap at 5,455 and further support at its August low of 5,119. He anticipates potential resistance at August and July highs of 5,648 and 5,667, respectively, in the event of a rally.
Turnquist emphasizes that momentum indicators have turned bearish, with signs of defensive leadership emerging, suggesting potential for increased volatility. He cites the declines in longer-duration Treasury yields, crude oil, and copper, alongside a rise in gold, as a warning of growing risks to a soft economic landing.
Economic Data:
The August non-farm payrolls report, scheduled for release by the Bureau of Labor Statistics at 8:30 a.m. EDT, is widely expected to show the addition of 161,000 jobs during the month, an increase from the 114,000 jobs added in July. The unemployment rate is anticipated to tick down from 4.2% to 4.3%. The average hourly wages, an inflation measure, are projected to have increased by 3.7%, slightly up from the 3.6% growth in July.
Following the data release, New York Fed President John Williams is scheduled to speak at 8:45 a.m. EDT, followed by Fed Governor Christopher Waller at 11 a.m. EDT.
Stocks in Focus:
Broadcom has fallen about 8% in pre-market trading as investors react negatively to the chipmaker’s fourth-quarter revenue guidance. Other stocks moving on earnings include Smartsheet Inc. (SMAR) (up about 4%), Smith & Wesson Brands, Inc. (SWBI) (down over 7%), UiPath Inc. (PATH) (over 9%), and Zumiez Inc. (ZUMZ) (up over 4%).
ABM Industries Incorporated (ABM) and Genesco Inc. (GCO) are among the companies reporting quarterly results before the market opening.
Commodities, Bonds and Global Markets:
Crude oil futures traded sideways below the $70 level, while gold futures rose modestly, approaching the $2,550 level. Bitcoin (BTC/USD) traded below $56,000 and was lower. The 10-year Treasury note yield fell 3.4 points to 3.699%.
Most Asian markets dropped sharply ahead of the U.S. jobs data, with Hong Kong suspended due to the threat of Super Typhoon Yagi. European stocks also experienced a significant pullback in early trading.
