A sharp downward revision may revive stagflation fears and weigh on risk assets as the Fed grapples with elevated inflation. On the other hand, an upward revision could offer market relief, potentially lifting sentiment.
However, labor market data could have a greater impact on risk appetite. Economists expect initial jobless claims to rise from 231k (week ending September 13) to 235k (week ending September 20).
A modest increase or drop in claims could temper bets on an October Fed rate cut, dampening sentiment. Conversely, a jump in claims toward 250k may boost expectations of a further policy adjustment in October and demand for risk assets.
The Kobeissi Letter recently commented on US labor market indicators, stating:
“US aggregate weekly hours worked has fallen -0.2% over the last 3 months, the largest decline since the 2020 pandemic. This indicator measures the total hours employees work in a week, reflecting overall labor market activity. A drop in hours often signals that companies are reducing work before cutting jobs, indicating that more layoffs may be coming. In previous cycles, such declines have frequently coincided with recessions.”
The GDP and labor market data precede Friday’s highly anticipated Personal Income and Outlays report. Economists forecast the Core PCE Price Index to rise 2.9% year-on-year in August, mirroring July’s increase. A higher reading could delay the timing of a Fed rate cut and raise concerns about stagflation as economic momentum slows.
Key Technical Levels for Dow Jones, Nasdaq 100, and S&P 500
Despite the second day of losses on Wednesday, September 24, US stock futures trade above the 50-day and 200-day Exponential Moving Averages (EMAs), reaffirming a short-term bullish bias.
However, the near-term outlook hinges on FOMC member commentary, US economic data, and the BoJ’s rate path. For traders, here are the key levels driving market trends.
Dow Jones
- Resistance: September 23 record high of 47,055 and then 47,250.
- Support: 46,500, 46,000, and then the 50-day EMA (45,317).