U.S. stock markets down; JOLTS, ISM in spotlight

U.S. stocks were largely lower on Tuesday as investors continued to digest and analyze comments made by Federal Reserve Chairman Jerome Powell ahead of a series of crucial data releases.

The Dow Jones index along with the S&P 500 index scored record highs at the close of trading on Monday, as the Federal Reserve’s decision to cut interest rates by nearly 50 basis points at the beginning of the month turned into a very positive month that has historically been the most difficult for the stock market.

All three major Wall Street averages advanced during both the month of September and the third quarter, the first positive September for S&P 500 on record since 2019.

The S&P 500 is up more than 20% this year right now, the first time since 1997 that the benchmark index has posted a gain of 20% or more during the first nine months of the year.

Jerome Powell halts expectations of major cuts.

The start of the new month, has for Wall Street been on the back foot after Fed Chairman Jerome Powell curbed expectations around another sharp rate cut this month, alluding that the committee does not feel “like it’s in a hurry to cut rates quickly” and that the process of reducing the federal funds rate “will unfold over time.”

Goldman Sachs strategists mentioned that they view Powell’s comments “as consistent with our forecast for 25 basis point cuts in November and December.” “We continue to view the choice between 25bp and 50bp in November as a close one,” they added.

The Fed began its policy shift the previous month with a 50bp rate cut, marking the first recorded reduction since 2020.

Heavy slate of economic data

There is still more U.S. economic data to study as investors are on the lookout for more signals on how the Fed is approaching more potential rate cuts this year.

The closely watched JOLTS (Job Openings and Labor Turnover Survey) report is expected to reveal that 7.640 million jobs were available in August.

Investors will also analyze the week’s September reading of the Institute for Supply Management’s manufacturing and services purchasing managers’ indexes as they look for new signals regarding the momentum of the U.S. economy.

The week ends with the release of the October nonfarm payrolls report on Friday, and economists expect the U.S. economy to have added 14,000 jobs.

CVS Health reviews its options

On the corporate side, shares of CVS Health (CVS) rose more than 2% before the markets opened after Reuters reported that the company is analyzing options that bring the separation of its retail and insurance divisions.

The news agency, citing people familiar with the matter, said CVS Health has been discussing various options, including the process of a split, with its financial advisors in recent weeks.

Oil prices on the lookout for Gaza cease-fire talks

Oil prices were down sharply on Tuesday, as concerns about tepid demand growth countered fears that escalating tensions in the Middle East could affect supply around the world.

Israel reported early Tuesday that its troops had begun “limited” raids against Hezbollah targets in the Lebanese border area, a move that risks aggravating a conflict in the oil-rich Middle East that threatens to engulf Iran and the United States.

The impact has been limited, however, as the sharp drop in Chinese manufacturing activity in September indicates a slowdown in future demand from the world’s largest importer of crude oil.

The industry group American Petroleum Institute will release its weekly estimate of U.S. crude oil and fuel stocks for the week ending September 27.