August's jobs report showed growth but came in slightly weaker than expected. (Photo by Mario ... [+]
Key Takeaways
- Market Declines Driven By Recession Fears And Weak Economic Data
- Volatility Surged As Recession Concerns Overshadow Inflation-Related Discussions
- Falling Copper And Oil Prices Signal Potential Economic Slowdown Ahead
Stocks are gearing up for a flat open on Friday following a rather quiet Thursday. Major indices closed the day mixed with the S&P 500 down 0.3%, while the Nasdaq Composite gained 0.25%. Both the Dow Jones Industrial Average and Russell 2000 fell 0.5%. Despite the relatively modest close, stocks had broad swings throughout the day, yet volatility fell by 6.5%. The big news of today; however, is the jobs report.
Forecasts for August employment called for 164 thousand new jobs created and an unemployment rate of 4.2%. The actual number of new jobs was slightly lower at 142 thousand, while the unemployment rate did come in as expected at 4.2%. As we headed into this morning's report, the CME Fed Watch Tool was reflecting a 59% chance of a one-quarter point cut to interest rates when the Federal Reserve Open Market Committee (FOMC) meets just under two weeks from now. That number was little changed after the jobs number was released.
It's worth noting that prior month reports were revised lower. June's report was adjusted down by 61 thousand jobs. The July report was revised lower by 25 thousand, for a total downward revision of 86 thousand fewer jobs in the past two months. All in all, today's report along with downward changes to June and July reflects a slowing labor market.
While I don't spend a considerable amount of time discussing technicals, I do think it's worth mentioning some of the more common indicators when appropriate. Heading into Friday, the S&P 500 is sitting right at its 50-day moving average and the Nasdaq Composite is at its 100-day moving average. For those unfamiliar, the daily moving averages are often viewed as key lines of support or resistance. Shorter-term traders often look at the 21 and 50-day line, while longer-term investors tend to focus on 100 and 200-day lines. Breaks below those lines are generally negative for stocks, which is what we're potentially facing at the moment.
Prior to this morning's economic report coming out, stocks were indicated lower. Those losses have since been reversed and we're actually looking at a flat to slightly higher open. However, as it stands, the S&P 500 is facing its first losing week since the first week in August, while the Nasdaq Composite is flirting with back-to-back down weeks. I also want to draw your attention to the performance in a number of the market leaders over the past month.
While the major market indices have largely recovered from losses suffered in early August, stocks like Microsoft, Nvidia and Super Micro Computer are well off their highs. Nvidia, the market darling much of the last couple years, is down 24% from its high. Microsoft is down nearly 13% and Super Micro is down 67%. In other words, we've seen a substantial fall from grace for a number of leadership companies and if your personal returns have not recovered as well as broad indices, it might be a good time to review your positions and see if you're as diversified across uncorrelated underlyings as you want.
For today, I am interested to see how the market ultimately digests today's job number. In the premarket, stocks are hovering around unchanged to up small, while volatility is down slightly. As I mentioned above, stocks are testing some key levels. Breaks below those areas of support could portend near-term weakness. As always, I would stick with your investing plans and long-term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.
