Friday’s Jobs Report: One of Three Major Tests for the Stock Market
A steadier backdrop this spring has helped lift U.S. stocks to record highs, but Friday’s jobs report is one of three big risks that could disrupt a summer calm in markets.
The S&P 500 index (SPX) has gained over 10% so far in 2024, with Wall Street’s fear index (VIX) and the bond market’s MOVE gauge both hitting their lowest levels since March 2022, when the Federal Reserve began hiking rates.
This recent stability is attributed to a “convergence” among investors thinking the Federal Reserve will cut rates no more than twice this year, while achieving a soft landing for the U.S. economy, according to Jason Draho, head of asset allocation at UBS Financial Services.
Draho noted a “clear consensus view” forming: “Growth is slowing but not collapsing, inflation is stubborn but trending lower, and the bar for Fed rate cuts is low while hikes are effectively off the table,” he wrote in a Monday client note.
This popular view suggests investors now expect minimal changes to benchmark rates this year, which Draho said could maintain market calm into late summer.
However, three near-term risks loom, starting with May’s jobs report due Friday.
Any “significant surprises relative to expectations” could be disruptive, as could May’s consumer-price index and the conclusion of the Fed’s next policy meeting, both set for June 12.
Stocks struggled for direction on Tuesday, following a wild session with trading glitches on the New York Stock Exchange. The Dow Jones Industrial Average (DJIA) was virtually unchanged, while the S&P 500 (SPX) and the Nasdaq Composite Index (COMP) were both down 0.2%, according to FactSet.
