Key points:

  • On Thursday, there was a decline in the main U.S. stock indexes.
  • Investors are anxiously awaiting the release of the U.S. employment report (NFP), which could influence the future trajectory of interest rates.
  • The escalating conflict in the Middle East and the associated risks to oil supplies pressured the market.

On Thursday, the U.S. stock market closed with losses. The main factors driving the negative trend were the anticipation of the U.S. employment data, set to be released on Friday, and growing geopolitical tensions in the Middle East, which drew significant attention from investors.

By the end of the trading session, key indexes showed the following results: the Dow Jones Industrial Average fell by 184.93 points (0.44%), closing at 42,011.59 points; the S&P 500 lost 9.58 points (0.17%) to settle at 5,699.96 points; the Nasdaq Composite dropped by 6.65 points (0.04%) to close at 17,918.48 points.

Despite recent declines, the S&P 500 still shows positive performance for the year, having risen by 19.5%.

What will this month’s NFP data reveal?

According to Thursday’s report, the number of initial jobless claims in the U.S. slightly increased last week. It’s important to note that factors such as Hurricane Helen and port strikes may have distorted the short-term outlook of the labor market.

The September employment report, due on Friday, is expected to have a significant impact on forecasts regarding the future trajectory of U.S. interest rates. According to a consensus forecast from Reuters experts, 140,000 new jobs were added in September, while the unemployment rate remained at 4.2%.

Investors are eagerly awaiting the labor market data, especially following last month’s decision by the Federal Reserve to cut the key interest rate by 50 basis points. This marked the first reduction in borrowing costs since 2020, reflecting the regulator’s desire to support economic growth amid uncertainty.

How has the Middle Eastern factor impacted the markets?

The CBOE Volatility Index, traditionally viewed as a barometer of market fears, reached 20.49 points at Thursday’s close, the highest level since September 6. Simultaneously, tensions in the Middle East intensified: Israeli military officials announced the urgent evacuation of residents from over 20 towns in southern Lebanon.

Against this backdrop, the U.S. stock market showed mixed dynamics. Initially, the indexes moved into positive territory following the release of data from the Institute for Supply Management, indicating substantial growth in U.S. services sector activity in September. This confirmed the ongoing steady pace of economic growth in the third quarter. However, the market later corrected downward due to rising oil prices and concerns about potential supply chain disruptions caused by ongoing port strikes.

The escalation of tensions in the Middle East led to a rise in energy company stocks, as investors grew concerned about the risk of oil supply disruptions to the global market. The S&P 500 Energy Index added 1.6%.

The release of financial results from major U.S. banks at the end of next week is expected to be the catalyst for the start of the third-quarter earnings season and will significantly impact the S&P 500’s performance.