After investors faced an onslaught of economic data to end August, a lighter calendar and holiday-shortened week await investors as the Federal Reserve’s next interest rate decision fast approaches.
US markets will be closed on Monday for Labor Day, with service sector updates, the Federal Reserve’s latest beige book report and corporate earnings set to dominate the week ahead.
After falling for most of the month, stocks closed in the last week of August.
The Nasdaq Composite (^IXIC) led the gains, up more than 3% last week, while the S&P 500 (^GSPC) gained 2.5%. The Dow Jones Industrial Average (^DJI) lagged its peers, rising 1.4 percent.
This week on the economic calendar, Wednesday offers a busy schedule for investors in the morning with S&P Global services sector readings and Institute for Supply Management readings.
On the corporate side, Kroger ( KR ), GameStop ( GME ) and Zscaler ( ZS ) highlighted a rough week with quarterly reports.
Last week’s crucial August jobs report showed the U.S. labor market continued to slow, with the U.S. economy adding 187,000 jobs last month and the unemployment rate unexpectedly rising to 3.8% as more Americans sought work.
The data capped a week of sharp declines in job openings and second-quarter GDP growth estimates. And investors view the data as a sign that the Fed will likely choose not to raise rates at the conclusion of its September 19-20 policy meeting.
Data from CME team showed. Markets on Friday saw a 94% chance the Fed would keep rates unchanged later this month, up from 80% last week. Bets on another rate hike in November fell to 34% from 47% a week earlier.
“The labor market is slowing down. [Friday’s] Report, combined with the previous friendly JOLTS report [last] The weekend should make the case for Fed tightening later this month,” JPMorgan economist Michael Ferroli wrote in a note to clients on Friday.
“The big question will be whether the midpoint will continue to trigger one more hike this year. Either way, Fed leadership should be happy with a week that shows the prospects for a soft landing.”
It was a “good week for those in the soft landing camp,” Ryan Sweet, chief U.S. economist at Oxford Economics, wrote in a note on Friday.
“The August employment report gives the Fed plenty of room to leave policy this year and next,” Sweet wrote.
“Job growth has continued to slow, unemployment has increased, labor force participation has increased, and income growth has slowed, all signs that a better balance between supply and demand is improving. The rebalancing of labor supply and demand. Expect a soft landing more smoothly than we initially expected.” We are going.
And despite developments in the economy, the Fed — and by extension, investors — may find a few positives in the week ahead as they look at the current forces at play for the stock market.
After a choppy August, stocks are now entering a historically bad month. In the year Since 1945, September has historically been the S&P 500’s worst month of the year, with the index falling an average of 0.7% in September and closing half of its gains less than half the time.
Although, as Yahoo Finance’s Jared Bleecker pointed out last week, the rally that starts in 2023 could have history on the side of investors. While the S&P 500 entered August up more than 10% in 2023, the benchmark index fell 3.2% in August. This year, the index decreased by 1.7% in August.
But over the years, the S&P 500 has risen an average of 2.3% in September and is up more than 9% from September through the end of the year.
“We believe the September consensus will be cautiously unwarranted,” Fundstrat’s Tom Lee said in a note on Friday. “Indeed, we believe September opportunities favor a 2 to 3% gain, supported by a downward shift in consensus views on inflation and inflation.”
Weekly calendar
Monday
Markets are closed for Labor Day.
Tuesday
Economic Information: Factory orders, July (-2.5% expected, + 2.3% earlier); Long-term inventory orders, July (-5.2%)
Earnings: Zscaler (ZS), GitLab (GTLB)
Wednesday
Economic Information: MBA mortgage applications (previously +2.3%); S&P Global US Services PMI, end August (previously 51); S&P Global US composite PMI, end August (previously 50.4); ISM Services PMI, August (52.5 expected, 52.7 earlier); Federal Reserve Beige Book
Earnings: American Eagle Outfitters (AEO), ChargePoint (CHPT), C3.ai (AI), Dave & Buster’s Entertainment (PLAY), Express (EXPR), GameStop (GME)
Thursday
Economic Information: Initial Jobless Claims (235,000 expected, 228,000 earlier)
Earnings: DOCU, RH, Zumiez (ZUMZ)
Friday
Economic Information: Wholesale goods, month-on-month-July (-0.1%)
Earnings: Kroger (KR), Rent the Runway (Rent)
Josh Shafer is a Yahoo Finance reporter.
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