Stock Market

Q4 kicks off amid volatility, jobs report in focus: What to know this week

The latest monthly jobs report is this week’s headline event as battered and bruised investors barrel into a new month and quarter writhing from a vicious downtrend that has plagued the year.

On Friday, the S&P 500 and Nasdaq Composite closed out a three-quarter losing streak for the first time since the 2008 Global Financial Crisis. The Dow Jones Industrial Average also posted a third-straight losing quarter, its first such time since 2015.

At 269 days and counting, the benchmark S&P 500 is now in its longest correction, peak to trough, since March 2009, according to figures from Compound Advisors’ Charlie Bilello. The current 8-month bear market is the longest since 2007-2009’s downturn, with the average length of a bear market since 1929 standing at 14 months.

A survey by the American Association of Individual Investors showed 60% of retail investors hold a bearish view of the stock market, the highest level since 2008 and the eighth most pessimistic reading in the 35 years the survey has been conducted.

The Labor Department’s September employment data is set for release at 8:30 a.m. ET on Friday morning. Economists expect nonfarm payrolls rose by 250,000 last month, per consensus estimates from Bloomberg. If realized, the figure would mark an anticipated moderation for Federal Reserve policymakers trying to tamp down the labor market in their battle against inflation – but not enough for officials to scale back on their rate hiking plans.

Strong labor market readings have stoked worries that Fed officials will stay on path with aggressive rate hikes and over tighten monetary conditions. And while strategists anticipated the impact of rate hikes showing up in employment data, figures have so far surprised to the upside. On Thursday, Labor Department data showed initial jobless claims slid to 193,000, the lowest since April, for the week that ended on Sept. 24.

A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 6, 2022. REUTERS/Brendan McDermid

Analysts at Bank of America said in a Friday note they expect strong payroll growth to continue, with indicators of labor market activity — like initial jobless claims and the Conference Board’s labor market differential — that feed into the institutions projections remaining red-hot since August’s report.

“Investors are hunting for confirmation bias that inflation is abating but strong jobs data has dashed all hopes,” Thornburg Investment Management portfolio manager Sean Sun said in emailed commentary.

“While there are some signs of disinflation out there, the strong jobless claims data is as if the Fed is trying to step on the brakes of a car that still hurtling downhill at a steep angle,” Sun added. “Investors shouldn’t ask if the Fed will pivot, but rather how deep into the recession we’ll find ourselves before they finally act.”

Other labor market readings due out through Friday include the ADP’s employment report, which measures levels of non-farm private employment, the Job Openings and Labor Turnover Survey (JOLTS), and the Challenger Job-Cut report, which offers information on the number of tracked corporate layoffs by industry and region.

Elsewhere in economic releases on the docket this week are ISM manufacturing and services data, construction spending figures, and a reading on total vehicle sales.

The corporate calendar will be light before a new earnings season gets underway, but some notable names on the docket include Constellation Brands (STZ), Levi Strauss (LEVI), and McCormick (MKC).

After a brutal September — worse for the Dow than even September 2008 — some Wall Street optimists look ahead to October, which based on seasonal trends has been dubbed a “bear-market killer” due to historically strong returns, especially in midterm election years. Every time the S&P 500 has dropped 7% or more in September, stocks have done well in October, Carson Group’s Ryan Detrick noted.

When the S&P 500 has dropped 7% or more in September, stocks have done well in October, with the exception of 2008.

When the S&P 500 has dropped 7% or more in September, stocks have done well in October, with the exception of 2008. (Source: Ryan Detrick/Carson Group)

However, even if markets get a reprieve, a high-stakes earnings season is likely to prove any bounce fleeting, with analysts rushing to slash their year-end forecasts amid worsening fundamentals tied to persistent inflation, rising interest rates, and slowing growth.

“Now I think for us it’s not about inflation and central banks; it’s about earnings,” Luca Paolini, chief strategist at Pictet Asset Management, told Yahoo Finance Live. “The focus will be on earnings because we’re going from a moderation shock, with higher interest rates, to a growth shock. This is where we feel more worried, and next earnings season is going to be really critical.”

Economic Calendar

Monday: S&P Global U.S. Manufacturing PMI, September final (51.8 expected, 51.8 during prior month); Construction Spending, month-over-month, August (-0.2% expected, -0.4% during prior month); ISM Manufacturing, September (52.1 expected, 52.8 during prior month); ISM Prices Paid, September (52.0 expected, 52.5 prior month); ISM New Orders, September (50.5 expected, 51.3 during prior month); ISM Employment, September (53.0 expected, 54.2 during prior month); WARDS Total Vehicle Sales, September (13.50 million expected, 13.18 million prior month)

Tuesday: Factory Orders Excluding Transportation, August (0.2% expected, -1.0% during prior month); Factory Orders, August (0.2 expected, -1.1% during prior month); Durable Goods Orders, August final (-0.2% during prior month); Durables Excluding Transportation, August final (0.2% during prior month); Non-defense Capital Goods Orders Excluding aircraft, August final (1.3% during prior month); Non-defense Capital Goods Shipments Excluding Aircraft, August final (0.3% during prior month); JOLTS Job Openings, August (11.075 million expected, 11.239 million during prior month)

Wednesday: MBA Mortgage Applications, week ended Sep. 30 (-3.7% during prior week); ADP Employment Change, September (200,000 expected, 132,000 during prior month); Trade Balance, August (-$68.0 billion expected, -$70.7 billion during prior month); S&P Global U.S. Services PMI, September final (49.2 expected, 49.2 during prior month); S&P Global U.S. Composite PMI, September final (49.3 expected, 49.3 during prior month); ISM Services Index, September (56.0 expected, 56.9 during prior month)

Thursday: Challenger Job Cuts, year-over-year, September (30.3% during prior month); Initial Jobless Claims, week ended Oct. 1 (203,000 expected, 193,000 during prior week); Continuing Claims, week ended Sep. 24 (1.387 million expected, 1.347 million during prior week)

Friday: Two-Month Payroll Net Revision, September (-107,000 prior); Change in Nonfarm Payrolls, September (250,000 expected, 315,000 during prior month); Change in Private Payrolls, September (275,000 expected, 308,000 during prior month); Change in Manufacturing Payrolls, September (20,000 expected, 22,000 during prior month); Unemployment Rate, September (3.7% expected, 3.7% during prior month); Average Hourly Earnings, month-over-month, September (0.3% expected, 0.3% during prior month); Average Hourly Earnings, year-over-year, September (5.1% expected, 5.2% prior month); Average Weekly Hours All Employees, September (34.5 expected, 34.5 during prior month); Labor Force Participation Rate, September (62.4% expected, 62.4% during prior month); Underemployment Rate, September (7.0% prior month); Wholesale Inventories, month-over-month, August final (1.3% expected, 1.3% during prior month); Wholesale Trade Sales, month-over-month, August (0.5% expected, -1.4% during prior month)

Earnings Calendar

Monday: No notable reports scheduled for release.

Tuesday: Acuity Brands (AYI)

Wednesday: Helen of Troy (HELE)

Thursday: AngioDynamics (ANGO), Conagra (CAG), Constellation Brands (STZ), Levi Strauss (LEVI), McCormick (MKC)

Friday: Tilray (TLRY)

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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