Indexes Close Lower Ahead of US Jobs Data, Middle East Remains a Key Focus – Reuters

By Caroline Valetkevitch

U.S. stocks closed lower on Thursday as investors awaited the upcoming monthly payroll report and closely monitored the escalating conflict in the Middle East.

Recent data revealed a slight increase in new unemployment benefit applications last week. Additionally, Hurricane Helene and ongoing strikes at ports could complicate the labor market outlook in the near future.

The jobs report for September, scheduled for release on Friday, is pivotal for assessing U.S. interest rate trends. Economists surveyed expect to see a gain of 140,000 jobs, with the unemployment rate projected to remain steady at 4.2%.

Investors are keen for further labor market insights following last month’s notable 50 basis points cut in the Federal Reserve’s benchmark interest rate, marking the first significant decrease in borrowing costs since 2020.

"It appears that investors are exercising caution ahead of tomorrow’s jobs report," noted Adam Sarhan, CEO of 50 Park Investments in New York. He added, "It’s typical to see profit-taking after a substantial rally like we’ve experienced over the past two to three weeks."

The Cboe Volatility Index, which measures market volatility, increased to 20.49, its highest closing level since September 6.

Israel’s military has advised residents of over 20 towns in southern Lebanon to evacuate immediately.

The Dow fell 184.93 points, or 0.44%, closing at 42,011.59; the S&P 500 decreased by 9.58 points, or 0.17%, to 5,699.96; and the Nasdaq slipped 6.65 points, or 0.04%, finishing at 17,918.48.

Despite the decline, the S&P 500 remains up 19.5% year-to-date.

Traders are now pricing in a 35% likelihood of a 50 basis point rate cut next month, down from 49% a week earlier, as indicated by the CME Group’s FedWatch Tool.

The benchmark index temporarily turned positive following a report from the Institute for Supply Management, which revealed that U.S. service sector activity surged to a 1.5-year high in September, signaling continued economic strength in the third quarter.

"Once again, the services sector is driving the economy forward," commented Brian Jacobsen, chief economist at Annex Wealth Management. However, he cautioned that "rising oil prices and the port strikes could disrupt things considerably."

Energy stocks gained traction alongside rising oil prices, fueled by concerns over the expanding regional conflict in the Middle East that might threaten global crude supplies. The S&P 500 energy index climbed by 1.6%.

A strike affecting workers on the East and Gulf coasts has now entered its third day, with Morgan Stanley economists warning that a prolonged work stoppage could push consumer prices higher, particularly impacting food costs.

Shares of Constellation Brands dropped 4.7% after the company reiterated its sales and profit projections for fiscal year 2025.

Results from major U.S. banks are expected to unofficially kick off third-quarter earnings for the S&P 500 at the end of next week.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of 2.13 to 1, while on Nasdaq, decliners led by a ratio of 1.99 to 1.

The S&P 500 recorded 25 new 52-week highs and 2 new lows, while the Nasdaq Composite noted 63 new highs and 114 new lows.

Trading volume on U.S. exchanges was 11.01 billion shares, compared to the 20-day average of 12.08 billion shares.