Jobs report, inflation data to test US rate path, economic strength
NEW YORK: Investors will sift through reports on employment and inflation in the coming week to assess chances of a sharper trajectory of interest rate hikes, which could undermine the US stock market’s rally.
Investors will examine employment and inflation reports this week to gauge the potential for faster interest rate hikes, which could weaken the US stock market's upward trend. Major equity indexes were trading near record highs on Friday, with the S&P 500 edging just under 1% below its mid-August peak, buoyed by technology and AI-related stocks.
The upcoming October 2nd employment report will be the primary focus for Wall Street, alongside a key inflation metric. Federal Reserve officials initiated interest rate increases this month for the first time in three years to combat high inflation. Jim Baird, Plante Moran Financial Advisors' chief investment officer, emphasized that the Fed and interest rates will dominate market attention.
Equity indexes displayed resilience despite rising Treasury yields, with the 30-year yield reaching a 20-year high and the 10-year yield surpassing 5.0%. Matthew Maley, Miller Tabak's chief market strategist, warned that bond market activity could quickly turn sour. While the S&P 500 has remained flat in September, it has still climbed 13% for the year.
Eight of 11 S&P 500 sectors are down for the month, including financials and utilities. The equal-weighted index, viewed as an average stock proxy, fell about 4% in September. Beneath the surface, the tech sector has gained ground, with semiconductor shares leading the charge. Micron Technology, a memory chipmaker now valued at over $1 trillion, is slated for earnings on Wednesday.
The upcoming September payrolls report is expected to show a gain of 100,000 jobs and an unemployment rate of 4.2%, suggesting a strong labor market. If the report surpasses expectations, it could initially bolster investor confidence. However, a surprisingly robust figure might trigger a short-term market downturn, as it would reinforce the expectation of another rate increase in October.
The Federal Reserve's decision hinges on inflation trends. The personal consumption expenditures price index (PCE), closely monitored by the Fed, is anticipated to confirm that inflation remains above the 2.0% target in the latest report.
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