S&P500: Bearish Trend Emerges as August Jobs Report Complicates Fed’s Path

US Markets Fall as Jobs Report Clouds Fed Rate Decision

Wall Street’s main indexes declined on Friday after a key jobs report failed to clarify the Federal Reserve’s upcoming interest rate decision. The uncertainty around potential rate cuts has left traders and investors interpreting mixed signals.

At 14:50 GMT, the Dow Jones Industrial Average is trading 40512.31, down 243.44 or -0.60%. The S&P 500 Index is at 5433.62, down 69.79 or -1.27% and the Nasdaq-100 Index is trading 16780.99, down 346.67 or -2.02%.

Labor Market Remains Resilient

The Labor Department report showed U.S. employment increased less than expected in August. However, the unemployment rate dropped to 4.2%, suggesting a controlled slowdown in the labor market. This mixed data has complicated predictions for the Fed’s monetary policy actions.

Rate Cut Expectations Adjust

Traders now estimate a 53% chance of a 25-basis point rate cut in September, according to the CME Group’s FedWatch Tool. Bets for a larger 50-basis point reduction have decreased to 47%. The market’s indecision reflects the challenge of interpreting recent economic indicators.

Tech Sector Faces Pressure

The technology sector has been particularly affected by current market conditions. The S&P 500 tech sector fell by 1.6%, leading declines among major sectors. Notable stock movements include Apple falling 0.61%, while Tesla and Nvidia dropped 2.9% and 1.5%, respectively.

Semiconductor Industry Outlook Weakens

Broadcom’s fourth-quarter revenue forecast, which fell slightly below estimates, has raised concerns about the semiconductor industry’s prospects. The Philadelphia SE Semiconductor index fell nearly 2%, with other chip stocks like Marvell Technology and Advanced Micro Devices also experiencing significant declines.

Broader Market Impact

The S&P 500 is on course for its steepest weekly decline in nearly five months, with technology stocks leading the downturn. Most S&P 500 sectors turned lower, indicating widespread market caution. The benchmark index is set for a weekly drop of more than 2%, its largest decline since early April.

Federal Reserve Bank of New York President John Williams stated that a more balanced economy has created an opportunity for rate cuts, with future actions dependent on economic performance. This statement, while informative, has not fully resolved market concerns.

Market Forecast

The short-term outlook appears bearish based on current data and market reactions. As September is historically weak for U.S. equities, with the S&P 500 falling about 1.2% on average since 1928, traders should prepare for potential increased volatility. The tech sector may face continued downward pressure, having already fallen more than 5% this week.

Investors should closely monitor upcoming economic data and Fed communications for clarity on interest rate directions. The market’s response to the jobs report highlights the complex relationship between labor market strength and monetary policy expectations, indicating a potentially unstable period ahead for U.S. equities.

Technical Analysis

E-mini S&P 500 Index futures are sharply lower. The next downside target is a pivot at 5420.50. Watch for a technical bounce on the first test of this level. But also be prepared for an acceleration to the downside if this level fails as support.

The 50-day moving average at 5540.75 is resistance. The 200-day moving average at 5254.00 is the next major downside target.