Investing.com – U.S. equity futures fell Tuesday, with investors returning from the long weekend in a cautious mood ahead of the release of key labor market data.
At 05:40 EST (09:40 GMT), the Dow Jones Industrial Average fell 185 points, or 0.5%, the S&P 500 futures dropped 28 points, or 0.5%, and Nasdaq 100 futures dropped 140 points, or 0.7%.
Focus shifts to labor market
Investors are returning from the Labor Day holiday, to a crucial week for the U.S. markets, with high anticipation for the upcoming labor market data, highlighted by Friday’s nonfarm payrolls release.
The previous month’s labor report fell short of expectations, prompting a sharp sell-off in risk assets.
The subpar labor figures have prompted discussions regarding their cause, with Hurricane Beryl being a significant factor. Despite the Bureau of Labor Statistics (BLS) stating that the hurricane, which hit Texas during the survey week of the July employment report, had “no discernible effect” on the employment data, the household survey revealed a different impact.
It indicated that 436,000 individuals were unable to work due to adverse weather conditions, marking a record high for the month of July. Moreover, 249,000 people were reported to be on temporary layoff during the same period.
The increase in unemployment has been largely attributed to these temporary layoffs. Market participants are keen to determine if the July data was indeed influenced by such transient factors.
The Federal Reserve, which closely monitors the labor market, will use this forthcoming report to decide on the magnitude of the interest rate cut at their next meeting, with the options being either a 25 basis points (bps) or a 50-bps reduction.
Ahead of Friday’s report, the U.S. ISM manufacturing survey data is out later today, and it is the first major indicator out in a big week for U.S. data.
Ahead of that, job openings data on Wednesday and the jobless claims report on Thursday will be in the spotlight.
Markets are pricing in a 69% chance of a 25 basis points cut when the Fed meets on Sept. 17-18, with a 31% probability of a 50-bps cut, CME FedWatch tool showed.
S&P 500 awaits tricky month
Over the last 10 years, the S&P 500 has lost an average of 2.3% in September, according to data from FactSet – the worst month for that index over that time period.
On top of that, the S&P 500 has posted a loss in each of the last four Septembers — including a 9.3% plunge in 2022.
Turning to individual stocks, Tesla (NASDAQ:TSLA) stock rose premarket after Reuters reported that the electric vehicle manufacturer is set to produce a new six-seat version of its Model Y vehicle, targeting a launch in China by late 2025.
Crude retreats on demand concerns
Crude prices traded lower Tuesday, as traders digested sluggish economic growth in China, the world’s biggest crude importer.
By 05:40 ET, the Brent contract dropped 1.6% to $76.30 per barrel, while U.S. crude futures (WTI) dropped 0.8% to $72.97 a barrel, after the contract did not settle on Monday because of the U.S. Labor Day holiday.
China’s purchasing managers’ index hit a six-month low in August, data showed over the weekend, pointing to likely weakening of demand from the world’s biggest crude importer.
These concerns have overshadowed the halt of oil exports at major ports in OPEC-member Libya on Monday as production was curtailed across the country.
