US Stocks Steady Today as Jobs Report Looms; Bearish September Ahead?

U.S. Stock Futures Start Week Steady-to-Better as Market Awaits Key Jobs Report

U.S. stock futures remained relatively unchanged at the start of the week, reflecting a cautious market as traders await a crucial jobs report that could influence market sentiment for the rest of the year. On Monday, the U.S. stock and bond markets were closed for Labor Day, leading to light trading. Futures tied to the tech-focused Nasdaq-100 Index futures saw a slight increase, along with the benchmark S&P 500 Index futures and the Blue Chip Dow Jones Industrial Average futures.

Market Performance and NVDA Impact

Despite a promising start, markets failed to sustain momentum last week, with major indices closing flat to slightly down. Notably, Nvidia’s (NVDA) earnings report, which was anticipated to be a major market mover, fell short of expectations. The tech giant delivered strong results with a “beat and raise” quarter, but the degree of outperformance did not match the lofty expectations, leading to a 5% drop in its stock. However, Nvidia’s decline had a limited impact on the broader market, signaling that the AI-driven growth narrative remains intact but is not enough to propel the market higher on its own.

Economic Data Supports Soft Landing Thesis

Last week’s economic data bolstered the belief that the Federal Reserve might achieve a “soft landing” for the economy. The revised Q2 GDP growth rate increased to 3.0% from an initial estimate of 2.8%, and consumer confidence rose to 103.3, beating expectations. Additionally, the Personal Consumption Expenditures (PCE) price index, a key inflation gauge, showed inflation is moderating, with Core PCE coming in slightly below expectations at 2.6% year-over-year.

Initial jobless claims also supported the bullish outlook, coming in below estimates for the fourth consecutive week. The data suggests a resilient labor market, easing concerns of a potential economic slowdown that had been stoked by higher jobless claims earlier in August.

Interest Rates and Bond Market Movements

Bond yields remained relatively stable, with the yield curve showing signs of un-inverting. The 2-year Treasury yield dropped slightly to 3.908%, while the 10-year yield increased marginally to 3.87%. Market expectations for a rate cut by the Federal Reserve in September have diminished, with the probability of a 50 basis point cut dropping to 30% from 35% last week. Traders appear to favor a gradual easing of rates, which could indicate a stronger underlying economy and a more sustainable market rally.

Outlook for the Week: Cautiously Bearish

As the market enters September, typically a challenging month for stocks, traders are likely to remain cautious. The S&P 500 has seen losses in each of the past four Septembers, and with the index currently consolidating near all-time highs, the risk of a minor pullback looms. While this week’s economic data has been supportive, the lack of immediate bullish catalysts and the impending jobs report on Friday could weigh on sentiment.

Given the mixed signals, the forecast for the week leans slightly bearish. However, if the S&P 500 manages to break through to new all-time highs, it could attract sidelined capital and shift the market into a more bullish stance. Until then, traders should prepare for potential volatility and consider defensive positions as the market digests recent gains.