Markets Drift Ahead of Jobs Data as Fed Watch Intensifies
Market Overview
U.S. equities ended the week slightly lower as light holiday trading and Friday’s pullback offset earlier gains. The S&P 500 still notched its fourth consecutive winning month, with small caps (Russell 2000) showing relative strength. Technology stocks saw volatility following NVIDIA’s earnings, while energy outperformed on rising oil and gas prices. Financials also advanced, supported by bank strength, while defensive sectors such as healthcare, consumer staples, and utilities lagged.
Overseas, political and trade headwinds weighed on sentiment. France’s austerity budget uncertainty and India’s tariff disputes on Russian oil pressured international and emerging markets, with France leading declines at over 3% for the week.
Federal Reserve Insights and Economic Roundup
Bond markets ended modestly higher, led by investment-grade corporates and mortgage-backed securities. The Treasury yield curve steepened, with shorter yields falling and longer maturities inching higher. Treasury auctions showed mixed demand, but strong interest in shorter maturities reinforced expectations for Fed rate cuts later this year.
Commodities broadly gained, led by natural gas (+10%) and precious metals as gold and silver rose more than 2%. Oil held above August support but remains constrained by inventories and slowing global demand. The dollar was little changed but remains near a critical support level.
Economic data brought an upward revision to Q2 GDP growth to 3.3%, driven by stronger intellectual property and consumer spending. However, slowing job growth points to weaker momentum ahead. Consumer confidence softened in August, with more households reporting jobs are harder to find and income growth slowing. Inflation expectations ticked higher, signaling pressure on consumer spending into Q3.
The Week Ahead
Markets will turn their attention to key labor data, providing critical insight into the Fed’s September policy decision.
- Tuesday: ISM Manufacturing, Construction Spending
- Wednesday: JOLTS Job Openings, Factory Orders, Fed Beige Book
- Thursday: ADP Employment Report, Productivity, Jobless Claims, ISM Services
- Friday: Nonfarm Payrolls, Unemployment Rate, Average Hourly Earnings
Investors will be focused on whether slowing job growth and resilient inflation shift expectations for September’s anticipated rate cut.