Macro Week Ahead: Stocks Start September Under Fire. What's Next?
Macro Week Ahead: Stocks Start September Under Fire. What's Next?
By:Ilya Spivak
The stock market is starting September on soft footing. Will key US economic data change the game?
- Stock market under pressure as the calendar turns from August to September
- Gold breaks five-month range top despite higher Treasury yields and US dollar
- US jobs data, service sector ISM PMI headline the calendar in the week ahead
Stock markets swooned to close out August despite US inflation data that landed squarely in line with expectations. The S&P 500 fell 0.69%, clocking its second-worst day in a month, after August 1. The tech-tilted Nasdaq 100 fell 1.29%. The drop seemed to echo an emerging pattern of aborted follow-through after key event risk.
In this case, the touchpoint was the second quarter earnings report from artificial intelligence (AI) stalwart Nvidia (NVDA). Bouts of optimism after consumer price index (CPI) data released mid-month as well as the much-anticipated speech from Federal Reserve Chair Jerome Powell at the Jackson Hole Symposium also fizzled within 24-48 hours.
Stocks under pressure as US jobs data looms ahead
All in, last week turned out to be a soggy affair for Wall Street. The S&P 500 finished the week down 0.2% while the Nasdaq slid 0.5%. Treasury bond rates continue to tick broadly lower, but more pain was concentrated at the front end of the yield curve. The US dollar managed a modest uptick, up 0.2% against the euro and the Japanese yen.
Selling pressure returned with gusto on the holiday-shortened first week of September. Equities faced heavy pressure, with prices across key indexes hitting two-week lows. Gold prices were a standout, surging past the top of their five-month range to hit a record high. Nevertheless, the dollar is trading sharply higher against its major peers.
US labor market data headlines the economic calendar this week. It is expected to show that the economy added 75,000 to nonfarm payrolls in August, pacing the 73,000 increase recorded in the prior month. The unemployment rate is seen ticking higher to 4.3%, the highest since October 2021.
The markets and the Fed are still at odds on rate cut plans
Leading into the jobs report, the Institute of Supply Management (ISM) will deliver an update on the state of the US service sector. Economists think that will show a pickup in the pace of economic activity growth, bringing it back to levels unseen since April. An analog report tracking the manufacturing sector fell short of expectations, however.
The figures will inform traders’ Fed policy bets. The priced-in probability of 25-basis-point (bps) rate cut this month is a near-certainty at 91.7%. However, the central bank remains at odds with the market about what comes next year. Traders are betting on three rate cuts, while officials have only allowed for one in their forecasting.
Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak
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