Sep Jobs Beat Forecast, US Stocks Rise, JPMorgan, Wells Fargo Earnings This Week

Over the past week, influenced by factors such as the better-than-expected U.S. September employment report, the three major U.S. stock indexes rose collectively. The Dow Jones Industrial Average accumulated a 0.09% increase, closing at 42,352.75 points; the Nasdaq Composite Index accumulated a 0.10% increase, closing at 18,137.85 points; the S&P 500 Index accumulated a 0.22% increase, closing at 5,751.07 points.

Michelle Cluver, Head of ETF Model Portfolios at Global X, stated that following the weak employment data this summer, the September non-farm employment report was reassuring. The latest data indicates that the U.S. economy remains resilient, supported by a healthy job market, which is good news for the stock market.

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Lindsay Rossner, Multi-Asset Investment Strategist at Goldman Sachs Asset Management, pointed out that as the market grapples with uncertainties surrounding the U.S. presidential election, the Federal Reserve's next moves, and corporate earnings reports, U.S. stocks will continue to fluctuate in the coming weeks.

The pace of Federal Reserve rate cuts may slow down.

Last Friday, a report released by the U.S. Bureau of Labor Statistics showed that the U.S. non-farm employment increased by 254,000 people in September, far exceeding expectations; the unemployment rate dropped from 4.2% in August to 4.1%. In addition, the average hourly wage increased by 0.4% month-on-month in September, a 4% increase compared to the same period last year.

JPMorgan economist Michael Feroli said that recent data showed that the cooling job market could have turned into a more worrying situation. However, after the release of the September non-farm employment report, the economy's "soft landing" seems to be back on track.

Kathy Jones, Chief Fixed Income Strategist at Charles Schwab, also said when discussing the U.S. September non-agriculture employment report: "The data is much stronger than expected. If the data is revised upwards, it indicates that the job market continues to remain healthy, which means the economy is healthy."

BMO economists wrote that last Friday's employment report "may change the Federal Reserve and the market's expectations for the scale and speed of future rate cuts."Before the release of last Friday's non-farm employment report, the market had been intensely debating whether the Federal Reserve needed to make another significant interest rate cut at its next meeting, as there were signs that the labor market was slowing down. In addition to stabilizing prices, achieving full employment is also one of the responsibilities of the Federal Reserve. After the release of the September non-farm employment report, data from the Chicago Mercantile Exchange's Fed Watch Tool showed that the market expected the Federal Reserve to cut interest rates by 0.5 percentage points in November with a probability of about 8%, lower than the 53% predicted a week earlier.

Rick Rieder, Global Chief Investment Officer of Fixed Income at BlackRock, believes that, given last Friday's excellent employment report, the Federal Reserve will proceed with a small interest rate cut. "We believe that interest rates should continue to decline, but from the current strong employment data, the Federal Reserve is more likely to cut interest rates by 25 basis points."

Seth Carpenter, Global Chief Economist at Morgan Stanley, also wrote in a report to clients last Friday: "We continue to expect a 25 basis point rate cut at the Federal Open Market Committee (FOMC) meetings in November and December."

Lindsay Rosner, Head of Multi-Asset Investments at Goldman Sachs Asset Management, said that last Friday's employment report, which was stronger than expected, gave the Federal Reserve the flexibility to cut interest rates by 25 basis points at the next meeting, or to pause and reconsider the possibility of a rate cut in December.

Gregory Daco, Chief Economist at EY, wrote in a report to clients that the September non-farm employment report "supports the view of Federal Reserve officials that there is no rush to cut interest rates." He added that some officials "may even be inclined to pause action."

The Federal Reserve's next meeting will be held on November 6th and 7th. Last month, the Federal Reserve cut interest rates by 50 basis points for the first time in over four years, marking the beginning of a new round of monetary easing. Wang Jinbin, Deputy Dean of the School of Economics at Renmin University of China, told reporters from the 21st Century Economic Report that the Federal Reserve's first 50 basis point interest rate cut mainly took into account the performance of the U.S. employment market and inflation. Recently, the unemployment rate in the U.S. labor market has seen a certain increase. In terms of inflation, the U.S. PCE price index increased by 2.2% year-on-year in August. Based on this, the Federal Reserve's monetary policy has returned to prioritizing "full employment," hence the relatively large interest rate cut for the first time.

The third quarter earnings season for banks has begun.

This week, U.S. corporate earnings will be released one after another, which will be a key test for the stock market rebound.According to data from LSEG Datastream, the S&P 500 Index is currently trading at 21.5 times forward 12-month earnings estimates, close to the highest level in three years and significantly higher than the long-term average of 15.7 times.

UBS equity strategists said in a report that they expect earnings for S&P 500 companies to grow by 4.7% year-over-year in the third quarter.

Jack Ablin, Chief Investment Officer at Cresset Capital, stated that since 2010, the total return of the S&P 500 Index has been closely correlated with the growth in corporate earnings and dividends.

Wall Street is looking for new clues on how lower interest rates have boosted profits at large U.S. banks. This Friday, JPMorgan Chase & Co. and Wells Fargo & Co. will kick off the third-quarter earnings season. Citigroup Inc., Goldman Sachs Group Inc., and Bank of America Corp. will report their earnings on October 15th, and Morgan Stanley will follow on October 16th.

Bryant van Cronkite, Senior Portfolio Manager at Allspring Global Investments, said that bank performance provides an important perspective on economic conditions, including default status and loan demand. "We will look for signs to see if the Federal Reserve's first 50 basis point rate cut at last month's monetary policy meeting has already had an impact on the economy through increased car sales and other commodity consumption. Ideally, after the first rate cut, businesses should show that leading demand indicators are strengthening."

Adam Parker, founder of Trivariate Research, said, "This earnings season is more important than ever. We need specific data from companies. Investors are particularly eager to see whether companies are delaying spending, whether demand is slowing down, and whether customers are changing their behavior due to geopolitical risks and macroeconomic uncertainties. In the current environment, corporate earnings and performance guidance are particularly important."

Global Financial Calendar

October 7th (Monday): UK Halifax Seasonally Adjusted House Price Index for September; China's foreign exchange reserves for September; Eurozone Sentix Investor Confidence Index for October; Eurozone retail sales data for August; Announcement of the Nobel Prize in Physiology or Medicine;October 8th (Tuesday): PepsiCo releases earnings report; Japan's August trade account; Germany's August seasonally adjusted industrial production data; France's August trade account; US September NFIB Small Business Optimism Index; Announcement of the Nobel Prize in Physics;

October 9th (Wednesday): The Federal Reserve's Federal Open Market Committee releases the latest meeting minutes; US API crude oil inventory as of October 4th; The Reserve Bank of New Zealand releases the interest rate decision and monetary policy assessment report; The Reserve Bank of India releases the interest rate decision; Announcement of the Nobel Prize in Chemistry;

October 10th (Thursday): US September CPI; The Federal Reserve releases the minutes of the monetary policy meeting; Delta Air Lines releases earnings report; US initial jobless claims for the week ending October 5th; The Bank of Mexico releases the minutes of the monetary policy meeting; Southeast Asian countries and Indian leaders attend the 21st ASEAN-India Summit;

October 11th (Friday): US September PPI; JPMorgan Chase (JPM.N), Wells Fargo (WFC.N), and BlackRock (BLK.N) release earnings reports; Germany's September CPI; The Bank of Korea releases the interest rate decision;