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Recent economic data, including lower than expected gross domestic product for the second quarter and Thursday’s core inflation data, have been giving investors hope that the Federal Reserve could be nearing the end of its interest rate increases. Core inflation rose as expected in July, ticking higher than June on an annualized basis but still below last year’s red-hot numbers.
The Fed, which said the data will be very influential in its rate decisions, could view the reports as a sign that its actions to date have begun to have an effect. It aims to bring inflation down to its 2% annual growth rate, but could hold off on a rate increase at the September meeting.
Futures markets largely expect such a pause, with some futures traders putting probabilities on a quarter of a percentage increase in November to round out the year.
Friday’s jobs report could be another major factor in the Fed’s decision making next month. Job openings came in lower than expected this week, and the jobs report is also expected to show a lower level of job creation than in prior months. The Fed has been looking for signs that the tight labor market is starting to loosen, which should help tame inflationary pressure.
Here are three things that could affect markets tomorrow:
1. Jobs report
The jobs report for August is due out at 8:30 ET (12:30 GMT). Analysts expect the economy created 170,000 jobs last month, down from 187,000 the prior month. Unemployment is expected to stay at 3.5%.
2. Manufacturing index
The ISM manufacturing index due out at 10:00 ET is expected to show a reading of 47 compared with 46.4 the prior reading.
3. Labor Day
U.S. markets will close Monday to mark the Labor Day holiday. Stock and bond trading resume on Tuesday in New York.
