Stock Market Update

[BRIEFING.COM] The stock market closed the first week of September on a downbeat note. The major indices registered sizable declines, settling near their lows of the session. The Dow Jones Industrial Average logged a 1.0% decline, the S&P 500 settled 1.7% lower, and the Nasdaq Composite fell 2.6%.

Participants were reacting to this morning's release of the August Employment Situation report.

Hiring activity was lighter than expected in August and there were downward revisions to July and June that left employment 86,000 lower for those months than previously reported. Also, the unemployment rate declined slightly and average hourly earnings increased a stronger than expected 0.4% month-over-month, which should be helpful for spending.

The report was weak enough to fuel more selling on this downbeat week for equities, but not weak enough to convince the market that the FOMC will cut rates by 50 basis points at the September 17-18 FOMC meeting. The fed funds futures market now sees a 29.0% probability of a 50 basis points cut this month, down from 41.0% in front of the data, according to the CME FedWatch Tool.

The negative bias also stemmed from weakness in the semiconductor space. The PHLX Semiconductor Index (SOX) dropped 4.5% after Broadcom's (AVGO 136.99, -15.82, -10.4%) relatively disappointing guidance. Other mega caps also traded lower, leading the Vanguard Mega Cap Growth ETF (MGK) to fall 2.1%. 

The 10-yr note yield settled two basis points lower today, and 20 basis points lower this week, at 3.71%. The 2-yr note yield settled 10 basis points lower today, and 28 basis points lower this week, at 3.65%.

• S&P 500: +13.4% YTD
• Nasdaq Composite: +11.2% YTD
• Dow Jones Industrial Average: +7.1% YTD
• S&P Midcap 400: +5.7% YTD
• Russell 2000: +3.2% YTD

Reviewing today's economic data:

• August Nonfarm Payrolls 142K (Briefing.com consensus 165K); Prior was revised to 89K from 114K, August Nonfarm Private Payrolls 118K (Briefing.com consensus 142K); Prior was revised to 74K from 97K, August Avg. Hourly Earnings 0.4% (Briefing.com consensus 0.3%); Prior 0.2%, August Unemployment Rate 4.2% (Briefing.com consensus 4.2%); Prior 4.3%, August Average Workweek 34.3 (Briefing.com consensus 34.3); Prior 34.2
  • The key takeaway from the report is that it was not as good as hoped, but it also wasn't as bad as feared. It was a report, however, that meshes with the understanding that there is a slowdown in hiring activity that should translate into a slowdown for the economy.

Looking ahead to next week, the August Consumer Price Index will be released on Wednesday, the August Producer Price Index will be released on Thursday, and the preliminary September University of Michigan Consumer Sentiment survey will be released on Friday.