Stocks rose over the past week, with the S&P 500 (^GSPC) notching several record closes, as investors digested more signs of cooling inflation amid resilient economic growth data.
For the week, the S&P 500 and Dow Jones Industrial Average (^DJI) were up about 0.7%. Meanwhile, the Nasdaq Composite (^IXIC) soared nearly 1%.
Next week, the September jobs report is expected to provide more clues about how quickly the job market is cooling. Updates on job openings, activity in the services and manufacturing sectors, and consumer confidence are also on the calendar.
At the company level, an update on deliveries from Tesla (TSLA) and quarterly results from Nike (NKE) will be in focus.
All eyes on work
The most recent reading of the Fed’s preferred inflation gauge showed that price increases continue to cool toward the Fed’s 2% target, putting even more focus on the Fed’s other mandate: maximum employment.
Federal Reserve Chairman Jerome Powell said at a press conference on September 18 that the labor market is currently in “solid condition” and that the central bank is cutting interest rates, in part, to maintain it. like this.
Still, there was a clear slowdown in the job market. The unemployment rate increased steadily in 2024 and stands at 4.2%, close to its highest level in almost three years. Meanwhile, job gains have slowed, with the US economy recording two of the lowest monthly job additions in 2024. And July job openings were at their lowest level since January 2021.
The pressing question as we approach the release of the October employment report on Friday morning is how quickly this slowdown in the labor market is occurring.
Consensus expectations on Wall Street point to more signs of a gradual cooling rather than a rapid slowdown. The September jobs report is expected to show that 130,000 nonfarm jobs were added to the U.S. economy, with unemployment holding steady at 4.2%, according to Bloomberg data. In August, the US economy added 142,000 jobs while the unemployment rate fell to 4.2%.
Entering the volume of labor market data, the most recent printout on weekly jobless claims showed that weekly jobless claims were at a four-month low in the week ending September 21.
Bank of America US economist Aditya Bhave wrote in a note to clients on Friday that the consistently low layoff numbers suggest “September’s employment report should be decent.”
“The job market is the biggest risk to our prospects,” Bhave wrote. “Layoffs are the key indicator to watch: as long as they remain low, the base case will likely remain a soft landing.”
Retail giant Nike is expected to release its fiscal first-quarter earnings after the bell on Tuesday. Wall Street expects the sportswear brand to post quarterly revenue of $11.65 billion, with earnings per share of $0.52. Both metrics would represent year-over-year declines from the same quarter a year ago as the company struggles to reinvigorate revenue growth.
The release will mark Nike’s first earnings report since it announced that Elliott Hill, a former Nike executive who retired in 2020, will replace John Donahoe as CEO on October 14. The announcement came as Nike shares are down about 25% for the year.
Citi analyst Paul Lejuez wrote in a note to clients that the implications of Hill’s return and Nike’s turnaround strategy will be the main focus of the earnings release.
“We believe [management] likely lowers full-year 2025 guidance on weakening macro and China brand in that [market]as well as more conservative assumptions linked to the planned innovation-driven sales acceleration in the second half of 2025,” Lejuez wrote.
Tesla Talk
Tesla shares have been quietly rising, with shares up more than 24% last month and officially back to positive for the year.
While this move came with little news, Tesla’s fundamental story will once again be in focus over the next week. The electric vehicle maker is expected to announce its third-quarter delivery numbers. Analysts expect Tesla to deliver about 462,000 cars in the quarter, up from 443,956 in the previous quarter and a 6% increase over sales seen in the same quarter a year ago.
The long-awaited reveal of the company’s robotaxi is scheduled for October 10th.
Investors look for ‘growth’
Stocks have largely risen since the Federal Reserve opted for a bigger interest rate cut at its most recent meeting. Investors appear to have accepted that the Fed was cutting the benchmark rate by half a percentage point to preserve a currently healthy economy, rather than to provide aid to a struggling economy.
Citi Head of US equity trading strategy Stuart Kaiser told Yahoo Finance that this scenario where the Fed isn’t cutting because the economy needs it is “extremely bullish” for stocks.
“It’s all about the growth side of the economy and it’s all about the consumer,” Kaiser said. “Any data that suggests that consumer spending is holding up and that you’re not seeing the weakness that people are worried about and that the Fed is worried about, I think all of that will be positive for equity markets.”
Later, a bad jobs report on Friday could have the opposite impact on stocks.
“If it turns out that they started cutting because they are legitimately concerned about labor market weakness, the rate cuts will not be enough to help stocks in that case and you will trade lower,” Kaiser said. “Then why [the Fed is cutting] matters here. And payrolls will help answer that.”
Kaiser’s comments link back to a chart that Ritholtz Wealth Management chief market strategist Callie Cox shared in the summer edition of Yahoo Finance Chartbook. Cox highlighted that the S&P 500 has had several reaction rate cuts over the years. Typically, whether or not the economy enters a recession is a key factor in these returns. As Cox’s work shows, only once has the S&P 500 fallen, a year after rate cuts began, as the economy sidestepped recession.
Weekly Calendar
Monday
Economic data: MNI Chicago PMI, September (46.4 expected, 46.1 previous); Dallas Fed manufacturing activity, September (-10.6 expected, -9.7 previous)
Earnings: Carnival Corporation (CCL)
Tuesday
Economic data: S&P Global US Manufacturing PMI, end of September (47 expected, 47 previous); JOLTS job openings, August (7.69 million expected, 7.67 previous); Dallas Fed services activity, (-7.7 before); ISM Manufacturing, September (47.7 expected, 47.2 previous); Construction spending, month-over-month, August (+0.1% expected, -0.3% previous)
Earnings: Lamb Weston (LW), McCormick (MKC), Nike (NKE)
Wednesday
Economic data: MBA mortgage applications, week ending September 27 (11% earlier); ADP private payrolls, September (+120,000 expected, +99,000 previous);
Earnings: Conagra (CAG), Levi Strauss (LEVI)
Thursday
Economic data: Challenging job cuts, year over year, September, (+1% previous); Initial unemployment claims, week ending September 28 (218,000 before); S&P Global US Services PMI, end-September (previous 55.4); S&P Global US Services PMI, end-September (previous 55.4); ISM Services, September (51.5 expected, 51.5 previous); Factory orders, August (+0.1% expected, +5% previous); Durable goods orders, end of August (0% before)
Earnings: Constellation Brands (STZ)
Friday
Economic calendar: Nonfarm payrolls, September (+130,000 expected, +142,000 prior); Unemployment rate, September (4.2% expected, 4.2% previously); Average hourly earnings, month over month, September (+0.3% expected, +0.4% previous); Average hourly earnings, year over year, September (+3.7% expected, +3.8% previous); Average weekly hours worked, September (34.3 expected, 34.3 previous); Participation rate of the active population, September (62.7% expected, 62.7% previously);
Earnings: No notable gains.
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