What to know this week

Stocks drifted higher over the past week, with the S&P 500 (^GSPC) notching several record closes as investors digested more signs of cooling inflation amid resilient economic growth data.

For the week, the S&P 500 and Dow Jones Industrial Average (^DJI) were up about 0.7%. Meanwhile, the Nasdaq Composite (^IXIC) popped nearly 1%.

In the week ahead, the September jobs report is expected to provide further clues on how quickly the labor market is cooling. Updates on job openings, activity in the services and manufacturing sectors, and consumer confidence are also on the calendar.

On a company level, a deliveries update from Tesla (TSLA) and quarterly results from Nike (NKE) will be in focus.

All eyes on labor

The most recent reading of the Fed’s preferred inflation gauge showed price increases continue to cool toward the Fed’s 2% goal, putting further focus on the Fed’s other mandate: maximum employment.

Federal Reserve Chair Jerome Powell said in a press conference on Sept. 18 that the labor market is currently in “solid condition” and the central bank is cutting interest rates, in part, to keep it that way.

Still, there’s been a clear slowdown in the labor market. The unemployment rate has steadily crept up in 2024 and sits at 4.2%, near its highest level in almost three years. Meanwhile, job gains have slowed, with the US economy recording two of its lowest monthly job additions of 2024. And job openings in July were at their lowest level since January 2021.

The pressing question as the release of the October jobs report on Friday morning approaches is just how quickly this slowdown in the labor market is taking place.

Consensus expectations on Wall Street point to more signs of a gradual cooling rather than a rapid slowdown. The September jobs report is expected to show 130,000 nonfarm payroll jobs were added to the US economy, with unemployment holding steady at 4.2%, according to data from Bloomberg. In August, the US economy added 142,000 jobs while the unemployment rate fell to 4.2%.

Entering the labor market data dump, the most recent print on weekly jobless claims showed weekly unemployment claims were at a four-month low for the week ending Sept. 21.

Bank of America US economist Aditya Bhave wrote in a note to clients Friday that the consistently low layoff numbers suggest that “September employment report should be decent.”

“The labor market is the biggest risk to our outlook,” Bhave wrote. “Layoffs are the key indicator to watch: as long as they stay low, the base case will likely remain a soft landing.”

Story continues

Retail giant Nike is expected to report its fiscal first quarter earnings after the bell on Tuesday. Wall Street is expecting the sports apparel brand to report quarterly revenue of $11.65 billion with earnings per share of $0.52. Both metrics would represent year-over-year declines from the same quarter a year ago as the company battles to reinvigorate revenue growth.

The release will mark Nike’s first earnings report since it announced Elliott Hill, a former Nike executive who retired in 2020, will replace John Donahoe as CEO on Oct. 14. The announcement came as Nike shares had fallen about 25% on the year.

Citi analyst Paul Lejuez wrote in a note to clients that the implications of Hill’s return and the turnaround strategy at Nike will be the key focus of the earnings call.

“We believe [management] likely lowers full-year 2025 guidance on weakening China macro and brand reset in that [market], as well as more conservative assumptions tied to the planned innovation-driven sales acceleration in the second half of 2025,” Lejuez wrote.

Tesla talk

Tesla stock has been quietly rallying, with shares rising more than 24% over the past month and officially turning back positive for the year.

While that move has come from little news, the fundamental story for Tesla will once again be in focus during the week ahead. The electric vehicle maker is expected to announce its third quarter delivery numbers. Analysts expect Tesla delivered about 462,000 cars in the quarter, up from 443,956 in the prior quarter and a 6% increase from the sales seen in the same quarter a year ago.

The company’s highly anticipated robotaxi reveal is slated for Oct. 10.

Investors look for ‘growth’

Stocks have largely chugged higher since the Federal Reserve opted for a larger interest rate cut at its most recent meeting. Investors appear to have accepted the Fed was cutting the benchmark rate by half a percentage point to preserve a currently healthy economy rather than to provide aid to a flailing one.

Citi head of US equity trading strategy Stuart Kaiser told Yahoo Finance this scenario where the Fed isn’t cutting because the economy needs it is “hugely bullish” for equities.

“Everything is about the growth side of the economy and everything is about the consumer,” Kaiser said. “Any data that suggests consumer spending is holding in and you’re not seeing the weakness that people are worried about and that the Fed is worried about, I think that’s all going to be positive for equity markets.”

Subsequently, a bad jobs report on Friday could have the opposite impact on stocks.

“If it turns out that they started cutting because they’re legitimately concerned about weakness in the labor market, rate cuts aren’t going to be enough to help equities in that case and you’re going to trade lower,” Kaiser said. “So the why [the Fed is cutting] matters here. And payrolls is going to help answer that.”

Kaiser’s comments call back to a chart Ritholtz Wealth Management’s chief market strategist Callie Cox shared in the summer edition of the Yahoo Finance Chartbook. Cox pointed out that the S&P 500 has had varying reaction rate cuts throughout the years. Usually, whether or not the economy enters a recession is a key driver of those returns. As Cox’s work shows, only once has the S&P 500 been lower a year after rate cuts start when the economy skirts recession.

Weekly Calendar

Monday

Economic data: MNI Chicago PMI, September (46.4 expected, 46.1 prior); Dallas Fed manufacturing activity, September (-10.6 expected, -9.7 prior)

Earnings: Carnival Corporation (CCL)

Tuesday

Economic data: S&P Global US Manufacturing PMI, September final (47 expected, 47 prior); JOLTS job openings, August (7.69 million expected, 7.67prior); Dallas Fed services activity, (-7.7 prior); ISM Manufacturing, September (47.7 expected, 47.2 prior); Construction spending, month over month, August (+0.1% expected, -0.3% prior)

Earnings: Lamb Weston (LW), McCormick (MKC), Nike (NKE)

Wednesday

Economic data: MBA Mortgage Applications, week ended Sept. 27 (11% prior); ADP private payrolls, September (+120,000 expected, +99,000 prior);

Earnings: Conagra (CAG), Levi Strauss (LEVI)

Thursday

Economic data: Challenger jobs cuts, year-over-year, September, (+1% prior); Initial jobless claims, week ending September 28 (218,000 prior); S&P Global US services PMI, September final (55.4 prior); S&P Global US services PMI, September final (55.4 prior); ISM services, September(51.5 expected, 51.5 prior); Factory orders, August (+0.1% expected, +5% prior); Durable goods orders, August Final (0% prior)

Earnings: Constellation Brands (STZ)

Friday

Economic calendar: Nonfarm payrolls, September (+130,000 expected, +142,000 prior); Unemployment rate, September (4.2% expected, 4.2% previously); Average hourly earnings, month over month, September (+0.3% expected, +0.4% prior); Average hourly earnings, year over year, September (+3.7% expected, +3.8% prior); Average weekly hours worked, September (34.3 expected, 34.3 prior); Labor force participation rate, September (62.7% expected, 62.7% previously);

Earnings: No notable earnings.