Stocks End Week Lower as Fed Uncertainty and Mixed Jobs Data Drive Volatility

Volatility continued to characterize the stock market last week. Wall Street endured significant swings driven by a mix of key corporate earnings reports, important economic data following the government’s reopening and shifting expectations for the Federal Reserve interest rate policy. Each of the major benchmark indexes ended the week in the red, unable to recover from a sharp midweek selloff, despite a rally last Friday. Most of the negative market returns were within the Consumer Discretionary and Information Technology sectors. Communication Services outperformed last week. Tech shares took a notable downturn last week, despite a favorable earnings report from a major AI/tech giant. The release of the September jobs report, delayed due to the government shutdown, provided mixed signals on the state of the U.S. economy in general and Federal Reserve policy in particular. Better-than-expected job growth was offset by an increase in the unemployment rate, which reinforced the Fed’s dilemma regarding future interest rate cuts. The yield on 10-year Treasuries eased slightly, ending the week down 8 basis points. Oversupply concerns drove crude oil prices to a four-week low.

Jobs Data Sends Mixed Signals —Fed Faces Tough Call on Rates

Following a more than six-week delay due to the government shutdown, the Bureau of Labor Statistics released employment data for September. Employment rose by 119,000 in September but has shown little change since April. In September, employment continued to trend up in health care, food services and drinking places, and social assistance. Job losses occurred in transportation and warehousing and in federal government. The total number of unemployed rose by 219,000 to 7.6 million, while the unemployment rate ticked up 0.1 percentage point to 4.4%. These measures were higher than a year earlier, when the jobless rate was 4.1%, and the number of unemployed people was 6.9 million. Following downward revisions, total employment in July and August combined was 33,000 lower than previously reported. The labor force participation rate (62.4%) and the employment-population ratio (59.7%) each rose 0.1 percentage point in September from the prior month. The number of long-term unemployed (those jobless for 27 weeks or more) dipped by 116,000 to 1.8 million in September. The long-term unemployed accounted for 23.6% of all unemployed people.

Eye on the Week Ahead

The end of the government shutdown should result in the release of economic data and reports. We will continue to track the release of important economic reports as they become available.