The S&P 500 capped off August with its fourth straight monthly gain, adding nearly 2.3%. Meanwhile, the Dow Jones Industrial Average saw a rise of almost 1.8%, reaching an all-time high, and the Nasdaq Composite increased by more than 0.6%. Despite a volatile month for markets, these gains suggest a level of resilience, even as investors brace for upcoming economic data releases.
The most important jobs report of our lifetime is here… important gauge for the Fed in determining 25bps or 50bps for the upcoming September meeting & whether or not the Fed cuts into rebounding growth (25bps) or in a panic (50bps).https://t.co/As81qyCNO4
— Eliant Capital (@eliant_capital) September 1, 2024
As U.S. markets pause for Labor Day, attention is shifting to key labor market data due later in the week. The August jobs report, set to be released on Friday, will be closely watched to determine whether the slowdown indicated in July’s numbers was an outlier or a sign of broader economic weakening. July saw the U.S. economy add just 114,000 jobs, significantly below expectations, with unemployment climbing to 4.3%, its highest in nearly three years. This data sparked recession concerns, but recent indicators suggest the economy may be more robust than initially feared.
Morgan Stanley economist Sam Coffin suggested that the July increase in unemployment might have been influenced by temporary layoffs, particularly due to disruptions caused by Hurricane Beryl in Texas. Coffin expects unemployment to drop to 4.2% in August with the addition of 185,000 jobs, reflecting a potential rebound in the labor market.
The Federal Reserve’s stance on interest rates remains a critical focus for investors. With inflation continuing to trend downward towards the Fed’s 2% target, there is speculation about whether the Fed will cut rates by 25 or 50 basis points at its September meeting. Some analysts, like Ben Ayers from Nationwide, believe the Fed has “leeway” to be more aggressive with rate cuts if the labor market shows significant deterioration. Currently, markets are pricing in a 31% chance of a 50 basis point cut, with a full percentage point of cuts anticipated by the end of the year.
Crucial September jobs report kicks off a new month: What to know this week #Crucial #September https://t.co/lEJgJ3WTEt
— CoinWebKo (@CoinWebKo) September 1, 2024
In corporate news, Nvidia reported earnings last week that surpassed expectations, yet the stock fell by 6% the following day. This decline did not trigger a broader market sell-off but highlighted a shift in market dynamics. For the first time in two years, sectors beyond the “Magnificent Seven” tech stocks—Apple, Alphabet, Microsoft, Amazon, Meta, Tesla, and Nvidia—are starting to outperform. From July 11 to August 29, these tech giants collectively fell 10.2%, while the remaining 493 stocks in the S&P 500 gained 4.1%.
Looking ahead, the week’s economic calendar includes several key indicators such as job openings, private wage growth, and activity in the services and manufacturing sectors. Corporate earnings will be relatively quiet, with reports from Broadcom and Dick’s Sporting Goods among the few notable releases.
Key Points:
- The S&P 500 ended August with a 2.3% gain, marking its fourth consecutive winning month, while the Dow and Nasdaq also saw modest increases.
- Investors are focused on the upcoming August jobs report, which will shed light on the state of the U.S. labor market following a weaker-than-expected July report.
- Economists predict a potential rebound in job growth and a slight decrease in unemployment, influenced by temporary factors such as Hurricane Beryl’s impact.
- The Federal Reserve’s upcoming decision on interest rate cuts is under scrutiny, with a possible 25 or 50 basis point reduction anticipated, depending on labor market data.
- Market dynamics are shifting, with sectors outside of the leading tech stocks starting to outperform, suggesting a broader market rally beyond the tech-heavy “Magnificent Seven.”
Conner T – Reprinted with permission of Whatfinger News