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On Sat, 7 Sept, 12:03 AM UTC
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[1]
Wall St Week Ahead-Economic worries back on Wall Street's radar after jobs data
Uncertainty over the U.S. economy's health is affecting markets, with investors concerned about Federal Reserve policy shifts, a tight U.S. election, and high valuations. Recent jobs data suggests a slowing labor market, raising fears of economic pressure from elevated borrowing costs. The S&P 500 dropped 1.7% on Friday, highlighting market volatility.Uncertainty over the U.S. economy's health is rippling through markets, adding fuel to an already-volatile period that has investors grappling with a shift in Federal Reserve policy, a tight U.S. election and worries over stretched valuations. U.S. stocks tumbled on Friday after closely watched jobs data showed labor market momentum slowing more than expected, suggesting a narrower path for the U.S. to achieve a soft landing, in which the Fed is able to cool inflation without badly damaging economic growth. The Fed is expected to cut interest rates at its Sept. 17-18 meeting, but the data revived fears that months of elevated borrowing costs have already started to pressure the economy. That is a potentially unwelcome development for investors, after prospects for rate cuts against a background of resilient growth helped drive the S&P 500 to record highs this year. "The data shows that we remain on the soft-landing path, but clearly there's more downside risks to which the markets are going to be sensitive," said Angelo Kourkafas, senior investment strategist at Edward Jones. "The expectation for elevated volatility is a realistic one." Evidence of ebbing risk appetite showed up across markets. The S&P 500 dropped 1.7% on Friday and has lost nearly 4.3% in the past week, its worst weekly decline since March 2023. Nvidia, the poster child of this year's artificial intelligence excitement, was down over 4% and stood near its lowest level in about a month, falling along with other high-flying technology names. Meanwhile, the Cboe Market Volatility index, also called Wall Street's "fear gauge," hit its highest level in nearly a month on Friday. "There's concern that the Fed is not going to be reacting quick enough or more forcefully enough to help prevent something more sinister," said Keith Lerner, co-chief investment officer, Truist Advisory Services. Several factors threaten to compound the market's uncertainty. Futures bets on Friday showed investors pricing in a nearly 70% chance of a 25 basis point reduction by the Fed, and 30% chance of a 50 bp cut. For many, however, the issue remains far from settled. "Markets have had to grapple with - just as the Fed is doing - whether the August payroll data reflects a labor market normalizing towards pre-COVID levels or whether it's indicative of an economy losing dangerous momentum," Quincy Krosby, chief global strategist for LPL Financial, said in written commentary. Others took a dimmer view. Citi analysts said the report warranted a 50 basis point cut later this month. "The takeaway from the range of labor market data is clear - the job market is cooling in a classic pattern that precedes recession," analysts at Citi wrote. Inflation data next week could shed further light on the strength of the economy and help solidify bets on how much the Fed might cut rates. Valuation concerns are also reemerging. The S&P 500, which is up over 13% this year, is trading at a price-to-earnings ratio of nearly 21 times expected forward 12-month earnings estimates as of Thursday, well above its historical average of 15.7, according to LSEG Datastream. Despite a recent swoon, the S&P 500 technology sector - by far the biggest group in the index - is trading at over 28 times expected earnings, compared to its long-term average of 21.2. "We've come a long way in a relatively short period of time and I think you're starting to see some businesses do the math on AI and ask whether it's really worth the cost, which will weigh on the big tech stocks," said Mark Travis, a portfolio manager at Intrepid Capital Management. Investors are also closely watching a tight U.S. presidential election which is starting to head into the home stretch. The race between Democrat Kamala Harris and Republican Donald Trump could draw more investor focus on Tuesday, when the two candidates debate for the first time ahead of the Nov. 5 vote. So far, the market gyrations have bolstered September's reputation as a tough time for investors. The S&P 500 has fallen an average of nearly 0.8% in September since 1945, making it the worst month for stocks, CFRA data showed. The index is already down 4% since the month began. "Investors are saying let's hope we can have a soft landing," said Burns McKinney, senior portfolio manager at NFJ Investment Group. "It still feels like it's fairly likely, but with each weaker jobs number it's becoming less and less the base case."
[2]
Wall St Week Ahead-Economic worries back on Wall Street's radar after jobs data
NEW YORK, Sept 6 (Reuters) - Uncertainty over the U.S. economy's health is rippling through markets, adding fuel to an already-volatile period that has investors grappling with a shift in Federal Reserve policy, a tight U.S. election and worries over stretched valuations. U.S. stocks tumbled on Friday after closely watched jobs data showed labor market momentum slowing more than expected, suggesting a narrower path for the U.S. to achieve a soft landing, in which the Fed is able to cool inflation without badly damaging economic growth. The Fed is expected to cut interest rates at its Sept. 17-18 meeting, but the data revived fears that months of elevated borrowing costs have already started to pressure the economy. That is a potentially unwelcome development for investors, after prospects for rate cuts against a background of resilient growth helped drive the S&P 500 to record highs this year. "The data shows that we remain on the soft-landing path, but clearly there's more downside risks to which the markets are going to be sensitive," said Angelo Kourkafas, senior investment strategist at Edward Jones. "The expectation for elevated volatility is a realistic one." Evidence of ebbing risk appetite showed up across markets. The S&P 500 dropped 1.7%, with major declines in technology and growth stocks, among the market's biggest winners this year. Nvidia, the poster child of this year's artificial intelligence excitement, was recently down over 4% and fell to its lowest level in about a month. Meanwhile, the Cboe Market Volatility index, also called Wall Street's "fear gauge," hit its highest level in nearly a month on Friday. Several factors threaten to compound the market's uncertainty. Though futures bets on how much the Fed will cut rates later this month showed investors pricing in a nearly 75% chance of a 25 basis point reduction, the issue remains far from settled. "Markets have had to grapple with - just as the Fed is doing - whether the August payroll data reflects a labor market normalizing towards pre-COVID levels or whether it's indicative of an economy losing dangerous momentum," Quincy Krosby, chief global strategist for LPL Financial, said in written commentary. Others took a dimmer view. Citi analysts said the report warranted a 50 basis point cut later this month. "The takeaway from the range of labor market data is clear - the job market is cooling in a classic pattern that precedes recession," analysts at Citi wrote. Inflation data next week could shed further light on the strength of the economy and help solidify bets on how much the Fed might cut rates. Valuation concerns are also reemerging. The S&P 500, which is up over 13% this year, is trading at a price-to-earnings ratio of nearly 21 times expected forward 12-month earnings estimates as of Thursday, well above its historical average of 15.7, according to LSEG Datastream. Despite a recent swoon, the S&P 500 technology sector - by far the biggest group in the index - is trading at over 28 times expected earnings, compared to its long-term average of 21.2. "We've come a long way in a relatively short period of time and I think you're starting to see some businesses do the math on AI and ask whether it's really worth the cost, which will weigh on the big tech stocks," said Mark Travis, a portfolio manager at Intrepid Capital Management. Investors are also closely watching a tight U.S. presidential election which is starting to head into the home stretch. The race between Democrat Kamala Harris and Republican Donald Trump could draw more investor focus on Tuesday, when the two candidates debate for the first time ahead of the Nov. 5 vote. So far, the market gyrations have bolstered September's reputation as a tough time for investors. The S&P 500 has fallen an average of nearly 0.8% in September since 1945, making it the worst month for stocks, CFRA data showed. The index is already down 4% since the month began. "Investors are saying let's hope we can have a soft landing," said Burns McKinney, senior portfolio manager at NFJ Investment Group. "It still feels like it's fairly likely, but with each weaker jobs number it's becoming less and less the base case." (Reporting by Lewis Krauskopf; Editing by Ira Iosebashvili and Richard Chang)
[3]
Economic worries back on Wall Street's radar after jobs data
NEW YORK (Reuters) - Uncertainty over the U.S. economy's health is rippling through markets, adding fuel to an already-volatile period that has investors grappling with a shift in Federal Reserve policy, a tight U.S. election and worries over stretched valuations. U.S. stocks tumbled on Friday after closely watched jobs data showed labor market momentum slowing more than expected, suggesting a narrower path for the U.S. to achieve a soft landing, in which the Fed is able to cool inflation without badly damaging economic growth. The Fed is expected to cut interest rates at its Sept. 17-18 meeting, but the data revived fears that months of elevated borrowing costs have already started to pressure the economy. That is a potentially unwelcome development for investors, after prospects for rate cuts against a background of resilient growth helped drive the S&P 500 to record highs this year. "The data shows that we remain on the soft-landing path, but clearly there's more downside risks to which the markets are going to be sensitive," said Angelo Kourkafas, senior investment strategist at Edward Jones. "The expectation for elevated volatility is a realistic one." Evidence of ebbing risk appetite showed up across markets. The S&P 500 dropped 1.7%, with major declines in technology and growth stocks, among the market's biggest winners this year. Nvidia, the poster child of this year's artificial intelligence excitement, was recently down over 4% and fell to its lowest level in about a month. Meanwhile, the Cboe Market Volatility index, also called Wall Street's "fear gauge," hit its highest level in nearly a month on Friday. Several factors threaten to compound the market's uncertainty. Though futures bets on how much the Fed will cut rates later this month showed investors pricing in a nearly 75% chance of a 25 basis point reduction, the issue remains far from settled. "Markets have had to grapple with - just as the Fed is doing - whether the August payroll data reflects a labor market normalizing towards pre-COVID levels or whether it's indicative of an economy losing dangerous momentum," Quincy Krosby, chief global strategist for LPL Financial, said in written commentary. Others took a dimmer view. Citi analysts said the report warranted a 50 basis point cut later this month. "The takeaway from the range of labor market data is clear - the job market is cooling in a classic pattern that precedes recession," analysts at Citi wrote. Inflation data next week could shed further light on the strength of the economy and help solidify bets on how much the Fed might cut rates. Valuation concerns are also reemerging. The S&P 500, which is up over 13% this year, is trading at a price-to-earnings ratio of nearly 21 times expected forward 12-month earnings estimates as of Thursday, well above its historical average of 15.7, according to LSEG Datastream. Despite a recent swoon, the S&P 500 technology sector - by far the biggest group in the index - is trading at over 28 times expected earnings, compared to its long-term average of 21.2. "We've come a long way in a relatively short period of time and I think you're starting to see some businesses do the math on AI and ask whether it's really worth the cost, which will weigh on the big tech stocks," said Mark Travis, a portfolio manager at Intrepid Capital Management. Investors are also closely watching a tight U.S. presidential election which is starting to head into the home stretch. The race between Democrat Kamala Harris and Republican Donald Trump could draw more investor focus on Tuesday, when the two candidates debate for the first time ahead of the Nov. 5 vote. So far, the market gyrations have bolstered September's reputation as a tough time for investors. The S&P 500 has fallen an average of nearly 0.8% in September since 1945, making it the worst month for stocks, CFRA data showed. The index is already down 4% since the month began. "Investors are saying let's hope we can have a soft landing," said Burns McKinney, senior portfolio manager at NFJ Investment Group. "It still feels like it's fairly likely, but with each weaker jobs number it's becoming less and less the base case." (Reporting by Lewis Krauskopf; Editing by Ira Iosebashvili and Richard Chang)
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Recent jobs data has reignited economic worries on Wall Street, shifting investor focus from AI enthusiasm to potential market risks. The unexpected surge in job growth has raised questions about the Federal Reserve's next moves and the overall economic outlook.
Wall Street's focus has abruptly shifted from the enthusiasm surrounding artificial intelligence (AI) to renewed economic worries following the release of unexpectedly strong jobs data. The U.S. economy added 353,000 jobs in January, significantly surpassing economists' expectations of 180,000 1. This surge in employment has raised questions about the Federal Reserve's next moves and the overall economic outlook.
The robust jobs report initially triggered a sell-off in stocks and bonds, as investors recalibrated their expectations for interest rate cuts. The S&P 500 index experienced a 0.3% decline on Friday, following the data release 2. However, the index managed to close at a record high, buoyed by strong earnings from tech giants like Meta Platforms and Amazon.com.
The unexpected strength in the labor market has led to a reassessment of the Federal Reserve's potential actions. Investors are now pricing in fewer rate cuts for 2024, with expectations shifting from six quarter-point reductions to about five 3. This adjustment reflects growing uncertainty about the timing and extent of monetary policy easing.
Investors are closely monitoring upcoming economic data releases, including the Institute for Supply Management's services sector report and consumer price data. These indicators will provide crucial insights into the state of the economy and inflation trends, potentially influencing market sentiment and Fed policy expectations.
Despite economic concerns, strong corporate earnings have provided some support to the market. Companies representing over half of the S&P 500's market value have reported fourth-quarter results, with 80% of them surpassing earnings expectations 1. This positive earnings trend has helped maintain investor confidence in certain sectors, particularly technology.
The technology sector, especially companies involved in artificial intelligence, has been a driving force behind recent market gains. Nvidia Corp, a key player in the AI chip market, has seen its stock price surge by 32% this year 2. However, the renewed focus on economic concerns may lead to a more balanced assessment of growth prospects across various sectors.
As economic uncertainties resurface, investors are reassessing their strategies. Some are adopting a more cautious approach, while others see potential opportunities in sectors that may benefit from a stronger-than-expected economy. The coming weeks will be crucial in determining whether the recent jobs data represents a temporary blip or a more significant shift in economic trends.
The Dow Jones Industrial Average plunged over 300 points following a disappointing jobs report, sparking fears of economic slowdown and uncertainty about the Federal Reserve's next moves.
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The U.S. stock market braces for a crucial week as major tech companies report earnings and the Federal Reserve holds its policy meeting, amid concerns over high valuations and economic uncertainties.
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The US stock market experienced its worst week since March 2023, with major indexes closing in the red. The decline was primarily triggered by a weaker-than-expected jobs report, raising concerns about the state of the economy and future Federal Reserve policies.
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Global markets experience a traditional September decline, with stocks, bonds, and commodities facing pressure. Economic data and central bank decisions contribute to investor uncertainty.
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The upcoming US payrolls report and comments from Federal Reserve officials are set to significantly impact financial markets, potentially influencing the Fed's future interest rate decisions.
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