Market Wrap: Holding Steady Ahead of August Jobs Report

The stock market ended with mixed results today, reflecting a lack of strong conviction among investors ahead of tomorrow's August Employment Situation Report.

The Nasdaq Composite managed to close slightly higher, up by 0.3%, supported by gains in some of its mega-cap stocks, while the S&P 500 slipped by 0.3%, dipping below its 50-day moving average of 5,506.

The Dow Jones Industrial Average also closed fractionally lower.

Lack of Clear Direction Amid Key Economic Data Releases

Today's market movement was characterized by mixed action, driven by cautious sentiment as investors waited for the August jobs data.

This caution comes after several key economic indicators released today offered a mixed picture of the labor market and economic growth. The ADP Employment Change Report for August came in weaker than expected, with only 99,000 jobs added compared to the consensus estimate of 150,000.

This slowdown in private sector job growth suggests some softening in the labor market, a development that could have implications for Federal Reserve policy moving forward.

However, the weekly initial jobless claims report provided a more positive contrast, showing fewer claims than expected at 227,000 compared to the consensus of 236,000.

Continuing claims were also slightly lower than revised figures from the previous week, indicating that layoff activity remains subdued. At the same time, hiring appears to be sticking at lower levels, as seen in the relatively stable number of continuing jobless claims.

Another important data point was the revised Q2 productivity report, which showed an upward revision to productivity growth to 2.5% from the initial estimate of 2.3%.

Alongside this, unit labor costs were revised downward to 0.4% from 0.9%, providing a more favorable view on inflation. Notably, unit labor costs have risen just 0.3% over the past year, marking the lowest rate since the fourth quarter of 2013.

This could alleviate some concerns over wage-driven inflation pressures in the economy.

In addition, the ISM Non-Manufacturing Index for August came in slightly above expectations at 51.5%, suggesting that the services sector—the largest part of the U.S. economy—continues to expand, albeit at a modest pace. This reinforces the market’s hope that the economy may be heading toward a soft landing rather than a hard recession.

A similar sentiment was echoed in the final S&P Global US Services PMI for August, which edged higher to 55.7 from 55.0 in July.

Sector Performance and Market Sentiment

While the broader market was largely in a holding pattern, there were notable moves within certain sectors. Eight of the 11 S&P 500 sectors ended the day in the red, led by declines in healthcare (-1.4%), industrials (-1.2%), and financials (-1.0%). Meanwhile, consumer discretionary (+1.4%), communication services (+0.5%), and information technology (+0.1%) sectors managed to finish in positive territory, supported by gains in mega-cap stocks.

Tesla was a standout performer, rising 4.9% after Bloomberg reported that the company could introduce its full self-driving technology in China and Europe by the first quarter of 2025, pending necessary regulatory approvals. This news provided a significant boost to the consumer discretionary sector.

Overall, the major indices have been in a consolidation phase this week. The S&P 500 has dropped 2.6% from last Friday’s close, while the Nasdaq Composite and the Russell 2000 have fallen by 3.3% and 3.9%, respectively, over the same period.

This week’s price action suggests that investors are adjusting their positions ahead of crucial economic data, particularly tomorrow’s August jobs report.

Treasury Yields and Commodities Market

In the bond market, U.S. Treasury yields moved slightly lower as investors digested the economic data. The 10-year note yield fell by four basis points to 3.73%, while the 2-year note yield declined by two basis points to 3.75%.

The modest decline in yields reflects the market's guarded optimism about the inflation outlook and the potential trajectory of Federal Reserve policy.

In the commodities market, crude oil prices remained relatively flat, inching up by just $0.01 to settle at $69.14 per barrel. Meanwhile, natural gas gained 5.6% to settle at $2.26 per million British thermal units.

Precious metals also saw some upward momentum, with gold rising by $17.80 to $2,543.20 an ounce, and silver climbing by $0.55 to $29.09 an ounce. Copper closed higher as well, up by $0.06 to $4.13 per pound, reflecting continued demand in the industrial sector.

Looking Ahead: Key Focus on August Employment Situation Report

All eyes are now on the August Employment Situation Report, which is set to be released tomorrow at 8:30 a.m. ET. This report is expected to provide more definitive insights into the current state of the labor market, which has been a focal point for both investors and the Federal Reserve in determining future policy moves.

Market participants will be closely watching for any signs of softening in employment or wage growth that could influence the Fed's decision-making process regarding interest rates.

Overall, today's market action underscores the cautious stance that investors are taking as they await clearer signals on the economy's direction. While there are concerns about economic growth and potential headwinds, particularly in the labor market, there is also a sense of optimism that inflation pressures are easing, which could help the market find firmer footing in the weeks ahead.