Job Openings Survey on the Horizon, Powell’s Rate Commentary – What’s Influencing the Markets

US stock futures edged lower as investors await important economic data releases this week, including job openings and manufacturing figures due on Tuesday. Market participants were also processing recent comments from Federal Reserve Chair Jerome Powell, who indicated that the central bank is not in a hurry to make further interest rate cuts.

1. Futures Indicate Lower Openings

On Tuesday, US stock futures were trading lower as investors enter the final quarter of the year, eagerly anticipating upcoming economic data and interpreting remarks from Federal Reserve Chair Jerome Powell.

By 03:28 ET, the Dow futures contract was down by 112 points (0.3%), S&P 500 futures dipped 11 points (0.2%), and Nasdaq 100 futures fell by 34 points (0.2%).

The S&P 500 had reached a record high on Monday, recovering from a brief pullback following Powell’s indication that there is no urgency for further interest rate reductions after a substantial 50-basis-point cut last month.

The Dow Jones Industrial Average also marked a new all-time high, and the Nasdaq Composite gained 70 points (0.4%). All three major averages on Wall Street posted gains in both September and the third quarter.

"While there was a lot of news on Monday, the overall narrative remained largely unchanged, and market activity was relatively quiet as investors prepared for key economic data in the coming days," noted analysts at Vital Knowledge in a client brief.

2. Upcoming Economic Indicators

Traders are preparing for the release of fresh economic data, which may provide insight into the state of the US economy and influence the Fed’s approach to potential rate cuts in the remaining months of the year.

On Tuesday, the widely watched Job Openings and Labor Turnover Survey (JOLTS) is expected to report approximately 7.640 million job openings for August, slightly down from July’s count of 7.673 million, which was the lowest in over three years. This data, along with other indicators suggesting a slight increase in hiring and stable layoffs, points to a gradually easing labor market.

Additionally, market participants are expected to analyze the September readings of the Institute for Supply Management’s manufacturing and services purchasing managers’ indices for further insights into economic momentum. The ISM manufacturing PMI, due for release on Tuesday, is projected to rise to 47.6 from 47.2 in August but remain below the pivotal 50-point threshold that separates contraction from expansion. The non-manufacturing PMI is forecasted to slightly increase to 51.6 from 51.5 in the prior month.

Analysts at Bank of America have noted that the upcoming data is likely to indicate that broader economic activity in the US is "cooling, not crumbling."

3. Powell Signals Cautious Approach to Rate Cuts

In comments made on Monday, Fed Chair Jerome Powell suggested that the Fed will likely opt for more conventional quarter-point interest rate cuts moving forward, while emphasizing that the future trajectory of rates is not predetermined.

Powell reiterated that the Federal Open Market Committee is not in a rush to implement rapid rate cuts, despite the significant reduction announced during its recent meeting. He justified the decision, stating it reflected confidence that a suitable adjustment of policy could help maintain labor market strength while achieving moderate economic growth with inflation trending back toward the 2% target.

Powell also expressed that the overall economy remains "in solid shape," and he committed to utilizing available tools to sustain this status. He mentioned that "two more cuts," totaling a half percentage point, could be appropriate by the end of 2024 if the economy progresses as anticipated.

4. 23andMe CEO Rejects Third-Party Takeover Offers

The CEO of 23andMe, Anne Wojcicki, has announced that the company will not entertain third-party takeover bids, as per a regulatory filing made on Monday. Instead, Wojcicki believes the most favorable path for the company is to transition to private ownership under her leadership.

This statement follows the recent resignation of all seven independent directors from the 23andMe board, triggered by a stalled management buyout proposal Wojcicki made earlier this year. Her proposal included taking the company private and purchasing all outstanding shares at a price of $0.40 each. Although she previously indicated she would consider outside offers while evaluating the deal, she has since shifted her stance.

5. Decline in Oil Prices

Oil prices fell on Tuesday as concerns over sluggish demand growth tempered fears that escalating tensions in the Middle East could disrupt global supplies.

By 03:25 ET, the Brent crude oil contract had decreased by 0.8% to $71.13 per barrel, while US crude futures (WTI) traded 0.9% lower at $67.59 per barrel.

Tensions escalated as Israel announced the initiation of "limited" military operations against Hezbollah in southern Lebanon, raising concerns about the potential for increased conflict in the resource-rich region, which could have wider implications involving the US and Iran.

Brent crude recorded a 9% drop in September, marking its largest monthly decline since November 2022. Additionally, WTI fell 7% last month, contributing to a 16% decrease for the quarter.