U.S. Stock Markets Fall in Cautious Mood Ahead of Friday’s Jobs Report

U.S. stocks futures fell on Tuesday, with investors returning from the long weekend cautiously ahead of the release of key labor market data.

Attention Focuses on the Labor Market

Investors are returning from the Labor Day holiday to a crucial week for U.S. markets, with high expectations for upcoming labor market data, most notably Friday’s nonfarm payrolls release.

Last month’s jobs report missed estimates, leading to a sharp drop in risk assets.

The weak labor numbers have sparked discussions regarding their cause, with Hurricane Beryl cited as a considerable factor. Although the Bureau of Labor Statistics (BLS) reported that the hurricane, which hit Texas during the July employment report survey week, had no discernible impact on the employment data, the household survey showed a different effect.

It indicated that 436,000 people were unable to work due to adverse weather conditions, setting a record for the month of July. In addition, 2490,000 people were declared temporarily laid off during the same period.

The increase in unemployment has been largely attributed to these temporary layoffs. Market participants are anxious to determine whether the July data was actually affected by these transitory factors.

The Federal Reserve, which closely follows the labor market, will use this upcoming report to determine the size of the interest rate cut at its next meeting, with the options of a 25 basis point or 50 basis point reduction.

Ahead of Friday’s report, today’s session will see the release of the U.S. ISM manufacturing survey data, the first relevant indicator in a big week for U.S. data.

Additionally, job openings will be released on Wednesday, and jobless claims on Thursday.

Markets are estimating a 69% chance of a 25 basis point cut when the Fed meets next on September 17-18, with a 31% chance of a 50 basis point cut, according to CME’s FedWatch tool.

S&P 500 Expects a Difficult Month

Over the past 10 years, the S&P 500 has lost an average of about 2.3% in September, according to FactSet data, making it the worst month for this index over that period.

Moreover, the S&P 500 has suffered losses in the past four Septembers, with a 9.3% drop in 2022.

In individual stocks, Tesla (TSLA) shares rose pre-market after Reuters reported that the electric vehicle maker is set to produce a new six-seat version of its Model Y vehicle, with plans to market it in China by the end of 2025.

Crude Oil Prices Fall on Demand Fears

Crude oil prices traded lower on Tuesday as traders digested sluggish economic growth in China, the world’s largest crude importer.

China’s purchasing managers’ index registered a six-month low in August, according to data released over the weekend, signaling a possible weakening in demand from the world’s largest crude importer.

These concerns have overshadowed Monday’s shutdown of oil exports at major ports in OPEC member Libya, where production was cut across the territory.