U.S. Stocks Stabilize, but Jobs Data Remains Key for Fed's Next Move
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U.S. stock markets stabilized Wednesday after a volatile Tuesday marked by escalating tensions in the Middle East and a U.S. port worker strike. While the major indexes closed with minor gains, investor attention remains firmly focused on Friday's nonfarm payrolls report, which could significantly influence the Federal Reserve's interest rate decision in November.
The S&P 500 index (SPX) finished the day little changed at 5,709.54, the Dow Jones Industrial Average ($DJI) rose 39.55 points (0.09%) to 42,196.52, and the Nasdaq Composite ($COMP) gained 14.76 points (0.08%) to 17,925.12. The 10-year Treasury note yield (TNX) added 5 basis points to 3.78%, while the Cboe Volatility Index (VIX) edged 0.4 points lower to 18.86.
Crude oil prices, which had benefited from the geopolitical uncertainty earlier in the week, gave up some gains after a Wall Street Journal report suggested OPEC members were not adhering to production targets. WTI Crude Oil futures (/CL) fell from around $72 per barrel early in the session to near $70.
The upcoming nonfarm payrolls report is expected to shed light on the health of the labor market and could potentially influence the Fed's decision on the pace of future interest rate cuts. Analysts anticipate that the economy added 140,000 jobs in September, which would be below the 142,000 reported for August but an improvement from the three-month average of 116,000.
A weak report could bolster calls for a more substantial rate cut by the Fed, which has been emphasizing the importance of the labor market in its recent policy statements. While the ADP National Employment Report showed a rise in private-sector hiring in September, it does not carry the same weight as the official payrolls report for the Fed.
Investors will also be closely watching other key economic data releases this week, including weekly initial jobless claims, the Challenger Job Cuts report, and the ISM Services PMI.
Futures traders are currently pricing in a 65% chance of a quarter-point rate cut by the Fed at its November meeting, with a 35% chance of a 50-basis-point cut.