S&P 500 Futures Choppy Today as Fed Weighs Rate Cut After Disappointing Jobs Data

S&P 500 Futures Volatile as Investors Weigh Weak Jobs Data and Fed’s Next Move

S&P 500 futures were choppy on Friday as traders processed a softer-than-expected August jobs report and its potential impact on Federal Reserve policy. The Dow and Nasdaq experienced mixed movements as markets headed into the close of a challenging week. With the S&P 500 and Nasdaq down 2.6% and 3.3%, respectively, and the Dow off by 1.9%, investors remain cautious.

At 13:14 GMT, Dow Futures are trading 40808.00, down 21.00 or -0.05%. S&P 500 Index Futures are at 5509.25, down 3.00 or -0.05% and Nasdaq 100 Futures are trading 18910.75, down 52.75 or -0.28%.

Technical Analysis:  50-Day Moving Average Key to Near-Term Market Direction

The price action this week clearly shows that the near-term direction is being controlled  by the 50-day moving average at 5542.23.

A sustained move over this level will signal the return of buyers and the potential resumption of the uptrend. A sustained move under the 50-day MA could create the downside momentum needed to challenge the pivot at 5420.50.

Weaker Jobs Growth Adds to Economic Concerns

The U.S. economy added 142,000 jobs in August, missing economists’ expectations of 164,000. This weaker-than-anticipated growth has heightened fears of a slowdown. Despite the softer numbers, the unemployment rate met expectations, ticking down to 4.2%. Recent labor market data have fueled uncertainty over the Federal Reserve’s policy decisions, with investors closely watching for signs of whether the central bank will opt to cut rates at its next meeting on September 18.

Weak job numbers are the latest in a string of indicators suggesting economic weakness. Private payroll data, released a day earlier, showed only 99,000 jobs were added in August, well below the forecast of 140,000. Coupled with July’s disappointing jobs report, concerns over a decelerating labor market are mounting.

Treasury Yields Fall Amid Economic Slowdown Concerns

U.S. Treasury yields fell on Friday as traders digested the jobs report. The 10-year Treasury yield dropped by over 5 basis points to 3.68%, while the 2-year Treasury yield slipped by more than 9 basis points to 3.657%. Investors sought safety in bonds as the disappointing employment data pointed to a possible economic slowdown, raising hopes for a more accommodative stance from the Fed.

Market participants are pricing in a 57% chance of a 25-basis-point rate cut at the upcoming Fed meeting, according to CME Group’s FedWatch tool, with a 43% probability of a more aggressive 50-basis-point cut. The Fed’s next move could hinge on upcoming inflation figures and additional economic data.

Broadcom and UiPath Lead Corporate News

In corporate news, Broadcom’s stock plunged more than 6.5% after issuing lower-than-expected revenue guidance for its fiscal fourth quarter. The semiconductor company forecasted $14 billion in revenue, slightly below analysts’ estimates of $14.04 billion. Meanwhile, UiPath shares surged 9.5% following better-than-expected second-quarter earnings, highlighting the software company’s growth momentum.

DocuSign also saw a 1.2% uptick in after-hours trading, as the e-signature software company beat both revenue and earnings estimates for the second quarter. Strong corporate earnings were a silver lining amid a tough week for broader markets.

Market Forecast: Cautious Optimism on Fed Rate Cut

The softer jobs report solidifies expectations for a Federal Reserve rate cut, with increasing speculation that the central bank could opt for a larger-than-expected reduction. With labor market risks rising, traders anticipate the Fed will prioritize economic stability over inflationary concerns. Short-term, this could provide relief for equity markets, but concerns over economic softness may keep volatility high in the coming weeks.

Investors should remain cautious, watching closely for inflation data and further labor market reports as key drivers for the Fed’s decision-making process in the lead-up to the September policy meeting.