The major U.S. index futures are indicating a slightly higher start on Monday, with stocks expected to trend upward after finishing the last session significantly above their lowest points, although still predominantly lower. Positive sentiment regarding the future of interest rates could lead to early gains on Wall Street after last Friday’s disappointing U.S. employment figures. In light of the recent report revealing that employment growth fell short of expectations for August, there is a 90.1 percent probability that the Fed will reduce rates by a quarter point later this month.
Overall trading activity may be somewhat subdued, as participants anticipate the release of inflation data that could influence the outlook for rates. Current expectations indicate that the annual rate of producer price growth for August will remain steady from July at 3.3 percent. The annual rate of growth in consumer prices is anticipated to rise to 2.9 percent in August, up from 2.7 percent in July. Meanwhile, the annual growth rate for core consumer prices, which excludes food and energy, is projected to remain steady at 3.1 percent. After struggling to maintain an early upward momentum, stocks faced downward pressure in the initial trading session on Friday. The major averages retreated into negative territory following their ascent to new record intraday highs. The major averages improved significantly from their lowest points throughout the day, yet ultimately finished in the red.
The Dow decreased by 220.43 points, representing a decline of 0.5 percent, closing at 45,400.86. The S&P 500 dropped 20.58 points, or 0.3 percent, finishing at 6,481.50. Meanwhile, the Nasdaq saw a slight decrease of 7.31 points, which is less than a tenth of a percent, ending at 21,700.39. For the week, the major averages delivered a varied performance. The tech-heavy Nasdaq increased by 1.1 percent, while the S&P 500 saw a rise of 0.3 percent; however, the narrower Dow experienced a decline of 0.3 percent. The initial decline on Wall Street occurred as traders processed a significant report indicating much weaker than anticipated U.S. job growth for August. The report indicated that non-farm payroll employment increased by only 22,000 jobs in August, following an upward revision to 79,000 jobs in July. Analysts had anticipated an increase in employment by 75,000 jobs, in contrast to the previously reported addition of 73,000 jobs for the prior month.
The report indicated that the previously reported increase of 14,000 jobs for June was revised downward to a decline of 13,000 jobs. Meanwhile, the Labor Department reported that the unemployment rate rose to 4.3 percent in August, up from 4.2 in July, aligning with economist estimates. Market participants initially responded favorably to the report, fueled by hopes that the data will persuade the Federal Reserve to reduce interest rates later this month. Buying interest diminished soon after trading commenced, prompting some traders to realize profits from the initial strength due to worries regarding the economic outlook. “In the near-term, weaker jobs data will increase the odds of a Fed rate cut, but could create shorter-term volatility, as a weaker labor market is not a sign of strength,” stated Larry Tentarelli. Financial stocks turned in some of the market’s worst performances on the day, with the NYSE Arca Broker/Dealer Index and the KBW Bank Index slumping by 1.9 percent and 1.8 percent, respectively.
A prolonged decline in crude oil prices also impacted oil producer stocks, causing the NYSE Arca Oil Index to decrease by 1.6 percent. Conversely, gold stocks experienced a significant increase in tandem with the rising price of the precious metal, leading to a 2.5 percent jump in the NYSE Arca Gold Bugs Index. Steel, biotechnology, and housing stocks demonstrated significant strength, effectively counterbalancing the weakness in the previously mentioned sectors.