Wednesday saw a strong bounce back in stock prices after large slides on Tuesday, but the rebound wasn’t nearly enough to prevent the stock market enduring its worst quarter in four years.
By Peter Martin
Thursday, October 1, 2015
None of the issues that so adversely affected Wall Street over that period have gone away; China’s economy has yet to show any signs that it is not in a slowing phase and there is still just as much uncertainty surrounding when the Fed will hike rates. Whether stocks will mount a final quarter rally, as we have seen in so many previous years, remains to be seen, but could hinge on whether there is any evidence that China’s malaise has dampened US earnings. The quarterly earnings season unofficially kicks off next week with the release of Alcoa’s quarterly figures.
Before that, we have a crucial economic release in the form of last month’s official government data for US employment, which is due out on Friday morning. This report is always closely watched by market participants and any surprise movements could seriously alter expectations for when the Fed will start to tighten monetary policy. The consensus estimate for tomorrow’s report is for non-payroll growth of 203,000 and for the unemployment rate to remain at 5.1%. Payroll growth of around 200,000 is a moderately healthy number, though following August’s unexpectedly weak 173,000 it would make only a modest bounce back in the pace of growth. August’s underwhelming numbers were somewhat brushed off back when they were announced, in the belief that the new school year was a mitigating factor that would lead to subsequent upward revisions. In that light, it will be very interesting to see what magnitude of revisions has actually been made.
Sticking with the employment sphere, jobless claims data released on Thursday morning did little to alter the complexion of the labor market. Despite initial claims climbing a slightly large-than-expected 10,000 last week to 272,000, the overall picture remains healthy. The four-week moving average edged lower to 270,750, which is almost 5000 better than it was looking a month ago. Continuing claims, which are reported for the week prior to initial claims, improved by 23,000 to 2.219 million, which gives a four-week average that also compares favourably with a month ago.
There was a mixed performance by stocks at the start of trading on Wall Street this morning. Though the leading US stock indices all opened in positive territory, the NASDAQ 100 quickly turned negative after heavily-weighted component Apple ($AAPL) dove 1.5%. Shortly after the opening bell, the Dow Jones was trading up 41 points or 0.25%, while the broader stock market measure of the S&P 500 Index rose just 0.02% to 1920.3.
Other key data out today relates to the manufacturing sector: Markit’s manufacturing PMI came in at 53.1 in the final reading for September, barely improved from the flash reading and therefore remaining close to the 22-month low set in August. A slowdown in employment growth was the main drag on the headline reading. The ISM manufacturing Index for September is scheduled for release at 10.00 ET.
Oil enjoyed a strong bounce on Thursday, US crude futures rising more than 3% to $46.65 prior to the release of the manufacturing reports. The price gains were sparked by news of Russian air strikes in Syria. The move, which raises the possibility of the US and Russia both conducting air strikes in the Middle East without co-ordination between the two, has heightened geopolitical risks to the supply of oil from the region.
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