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“This week’s jobs report, while not the only deciding factor, is likely to be a major factor in the Fed’s decision between cutting rates by 25 or 50 basis points,” said Jason Pride and Michael Reynolds of Glenmede. “Even modest signals in this week’s jobs report could be a key decision point in whether the Fed takes a more dovish or aggressive approach.”
The yield on 10-year U.S. Treasury notes fell five basis points to 3.85 percent. A record number of big companies are flocking to the bond market, taking advantage of low borrowing costs ahead of the U.S. presidential election. The yen rose after Bank of Japan Governor Kazuo Ueda reiterated that the central bank will continue to raise interest rates if the economy and prices perform as expected.
Nvidia shares fell.credit: Bloomberg
Earlier this week, JPMorgan Chase & Co. strategists said the stock market rally could stall at record highs even if the Federal Reserve begins a highly anticipated rate-cutting cycle. The team, led by Mislav Matica, noted that any policy easing would be in response to slowing growth, making it a “reactive” cut.
September was the biggest loss for the S&P 500 since 1950, according to stock traders’ calendar. Bank of America’s market-sentiment gauge rose to its highest level in nearly 2 1/2 years last month — approaching a “sell” signal for U.S. stocks.
“For every year since World War II, August and September have seen the S&P 500 endure a double-dose of declines,” said Sam Stovall of CFRA. “However, history now advises investors to buckle down, as this back-to-back seasonal slide during election years has shifted to September and October.”
Traders expect the Fed to cut interest rates by a full percentage point by the end of the year, which would mean an unusual half-percentage-point cut at one of the three remaining meetings in 2024.
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Moreover, they expect the central bank to cut benchmark interest rates by more than two full percentage points over the next 12 months, which would be the biggest cut outside of an economic downturn since the 1980s.
At the start of a busy week of economic data, a report showed that manufacturing activity in the United States contracted in August for the fifth straight month.
The August jobs report due Friday is expected to show the world's largest economy added about 165,000 jobs, based on the median estimate in a Bloomberg survey of economists.
While average job growth over the past three months has exceeded the modest gain of 114,000 jobs in July, it is expected to slow to just over 150,000 jobs — the smallest since the start of 2021. The unemployment rate is likely to fall in August to 4.2% from 4.3%.
Bloomberg
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