Stock market this week: Jobs report, Fedspeak in focus

The stock market will be poring over a lot of news this week.

Investors are kicking off a packed week of economic data and other inputs that could influence the trajectory of the market.

rate cuts from the Fed.

Here’s everything you need to know about what could move markets this week.

1. Jobs report

The main event will come at the very end of the week with Friday’s nonfarm payroll report.

Economists are expecting the US to have added 45,000 jobs last month. That’s up from the 22,000 payrolls added in August, which badly missed expectations. The unemployment rate, meanwhile, is expected to hold steady at 4.3%.

Markets are also absorbing a handful of other data points this week related to the labor market. Here’s what’s on deck:

• Job openings and labor turnover: Tuesday | 7.1 million expected openings (from 7.2 million in September)
• ADP private payrolls: Wednesday | 40,000 expected payrolls (from 54,000 in September)
• Initial jobless claims: Thursday | 228,000 expected claims (from 218,000 the prior week)

The strength of the job market is a key focus for investors as they try to chart the path of the Fed’s rate-cutting cycle. Central bank officials have pivoted from inflation to labor as the biggest driver of policy, with Fed Chair Jerome Powell nodding to softening labor conditions in public remarks since August’s Jackson Hole symposium.

Traders are still largely pricing in two more cuts through the end of the year, according to the CME FedWatch tool, but a particularly strong jobs report could cause investors to reset their expectations for Fed easing.

Likewise, a particularly weak jobs report could stoke fear that growth is weaker than expected, another scenario that could hurt stocks.

“Markets will gear up for jobs week, with market participants set to receive a host of indicators at a time when the Federal Reserve has cut interest rates, citing increased risks to the labor market,” Art Hogan, the chief market strategist at B. Riley Wealth, said on Monday. “Traders will be closely watching for further signs of weakness in the labor market.”

“We think job growth could slow further in coming months, leading to a gradual increase in the unemployment rate,” JPMorgan wrote in a note to clients last week.

2. Fedspeak

Markets will also be parsing comments from a big lineup of central bank speakers this week. Here’s who investors will be hearing from in the week:

The speakers could offer investors fresh insight into the central bank’s thoughts about the economy and the outlook for rate cuts going forward. The comments will set the tone before markets take in the central bank’s September meeting minutes, which are due next week.

3. Consumer Confidence

The September Consumer Confidence Index is set to be released Tuesday morning. That will offer investors a glimpse into how optimistic Americans are feeling about the economy, particularly as recession risks linger in the background.

Economists expect the index to show a reading of 95.8. That’s down slightly from last month, when Consumer Confidence clocked in at 97.4, but still well above levels recorded during past recessions, according to data from the Conference Board.

“The domestic economy seems to have rebounded nicely in the latest three-month period, with the consumer leading the way,” Steven Ricchuito, the US chief economist at Mizuho Securities, wrote in a note, referring to strong GDP data for the second quarter.

“Dampened employment growth appears to be offset by longer hours and reduced taxes on overtime pay leaving the consumer in a position to keep spending,” he added.

“Consumers’ spending looks far more robust after August’s numbers, with a 3% increase in Q3 now looking likely. But this pace is unsustainable,” economists at Pantheon Macroeconomics wrote in a note, adding that they expected spending to slow for the next several quarters.

4. Government shutdown risks

Investors are keeping a close eye on how US budget talks unfold this week. The government risks a shutdown beginning on Wednesday unless Congress reaches an agreement on spending or temporarily extends the budget deadline.

Government shutdowns have historically had a short-lived effect on markets, but stocks could be volatile immediately after a shutdown, if one occurs.

“We prefer to look through this additional noise from Washington and instead view any equity-market pullback as an opportunity to incrementally add exposure to our favored cyclical and growth sectors: Financials, Information Technology (IT), and Industrials,” Jennifer Timmerman, an investment strategy analyst at Wells Fargo, said in a note.