Morning in New York: employment data will determine the market vector

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The key macroeconomic event of the day will be the publication of the August report on the US labor market. The consensus forecast assumes a moderate increase in the number of employed in the non-farm sector by 75 thousand (after 73 thousand in July) and an increase in the unemployment rate from 4.2% to 4.3%. The realization of this forecast is likely to be perceived positively by the market, as it will confirm the thesis of gradual cooling of the labor market and strengthen expectations for a Fed rate cut. However, noticeably weaker data, on the contrary, may provoke a correction on the stock market, as investors will start to put growing recession risks into prices.

On the political front, attention remains focused on statements from President Trump, who reiterated plans to impose "substantial" tariffs on semiconductors on Thursday night during a White House dinner with executives from major technology companies. However, he emphasized that companies investing in U.S. manufacturing, such as Apple (AAPL), would be protected from the new restrictions. Despite the lack of groundbreaking details, these comments support uncertainty in the technology sector ahead of the release of employment data.

An additional factor for the markets will be the signing of a trade agreement between the US and Japan, which provides for a 15 percent prime rate on imports of Japanese goods and $550 billion of Tokyo's investments in American projects. The agreement opens new opportunities for the U.S. agricultural sector and aircraft industry and reduces the risks of further escalation of trade conflicts with a key Asian partner.

The confrontation between the White House and independent regulators continues to develop. It has become known that the presidential administration has asked the Supreme Court to authorize the firing of Federal Trade Commission (FTC) Commissioner Rebecca Slaughter. This move, following an attempt to fire Fed Governor Lisa Cook, underscores the White House's intention to increase control over federal agencies.

No significant corporate reports are scheduled for today.

Futures on US indices are showing positive dynamics ahead of the publication of key data. We assess the balance of risks as neutral. Increased volatility is expected during and after the release of the labor market report. We focus on S&P 500 fluctuations in the range of 6420-6580 points (from -1.3% to +1.2% of the previous session's closing level).

- Broadcom (AVGO) shares rose nearly 7% in the premarket after reporting fiscal third-quarter earnings. The company reported revenue of $15.95 billion, beating consensus of $15.83 billion, and noted AI segment growth of 63% YoY to $5.2 billion. Fourth-quarter guidance was $17.4 billion versus expectations of $17 billion, bolstering optimism for continued expansion in custom chips and networking equipment. Broadcom is also helping OpenAI build an AI chip to compete with Nvidia.

- Lululemon (LULU) shares collapsed after revising its full-year guidance. The company now expects revenue in the range of $10.85-11 billion versus the previous guidance of $11.15-11.3 billion and EPS of $12.77-12.97 instead of the previously projected $14.58-14.78. Management attributed the decline to weak demand in the U.S. and pressure from duties, which the company estimates will reduce gross profit by about $240 million.

- Shares of Samsara (IOT) reacted to the release of its fiscal Q2 earnings. The stock rose 11% on the pre-market. The company reported adjusted earnings of $0.12 per share on revenue growth of 30.4% YoY to $391.5 mln, which beat analysts' expectations. An additional driver was the data on the expansion of the client base, in particular, the number of companies with annual expenses over $100 thousand.

- DocuSign (DOCU) shares are adding more than 8% thanks to an upbeat outlook. The company expects quarterly revenue in the range of $804-808 million and full-year revenues of $3.19-3.2 billion, which is above consensus. This boosted confidence that the business's move to integrate AI tools will support revenue growth.

- BILL Holdings (BILL) has attracted investor attention after activist Starboard Value acquired about 8% of the company's shares and announced its intention to propose board candidates ahead of its annual meeting. The company has previously initiated a $300 million buyback, and Starboard's strategy adds to expectations of structural changes and possible M&A. The stock is up nearly 10%.

Trading on September 4 on the U.S. markets ended with growth, and the S&P 500 index updated the historical maximum, adding 0.83%. Dow Jones rose by 0.77%, Nasdaq 100 - by 0.93%, and Russell 2000 - by 1.26%. The key driver of the day was the release of macroeconomic data that pointed to further weakening in the labor market, bolstering investor expectations for a Fed rate cut soon. Shares of the "Magnificent Seven" were predominantly rising, with Amazon (AMZN) showing the best performance amid news of data center construction for Anthropic using Trainium's own chips, which reinforced expectations of further growth in the cloud business. Amazon's growth was the main driver for the entire cyclical consumer staples sector (XLY: +1.83%), which led the day. The defensive Utilities sector (XLU: -0.12%) was the outsider.

The main attention of investors was focused on the labor market statistics, which generally confirmed the "soft landing" scenario. The report from ADP showed that in August only 54 thousand jobs were created in the private sector, which is much lower than the forecast of 68 thousand and became another signal of cooling of the economy. Confirming this trend, the number of initial jobless claims also came in above expectations (237k vs. the consensus of 230k). This weak employment data was perceived as the main positive driver for the market, as it strengthens arguments in favor of the Fed's interest rate cut soon.

At the same time, ISM's ISM Services Business Activity Index for August beat forecasts with 52 points (consensus: 51 points), while the new orders component showed particularly strong growth, soaring from 50.3 to 56 points. However, the details of the report were less optimistic: the employment component remained in contractionary territory for the third consecutive month and the price index, although down, remained at a high level. As a result, the report was perceived by the market as mixed, as strong overall numbers were offset by weak labor market data and continued inflationary pressures.

Against the background of ambiguous macro data, investors also followed the news from Washington. The candidate for the post of Fed governor Stephen Miran at the Senate hearings promised to maintain the independence of the regulator. At the same time, it became known that the U.S. Department of Justice opened a criminal investigation against the current Governor Lisa Cook, which maintains the degree of tension around the central bank.

- Shares of Ciena (CIEN: +23.3%) rose sharply on strong fiscal Q3 reporting: margins exceeded expectations, a record order book and an upbeat revenue and gross margin outlook gave investors added confidence.

- Among corporate developments, news of a partnership between T. Rowe Price (TROW: +5.8%) with Goldman Sachs, which plans to invest up to $1 billion, building a stake of up to 3.5% and jointly promoting private market products to retail investors.

- Texas Instruments (TXN: -4.3%) came under pressure after the company's management noted at an industry conference that demand recovery is slower than expected and warned of a possible reduction in wafer starts in the coming quarters.

- Elevance Health (ELV: -4.2%) declined following the confirmation of below consensus full-year earnings guidance, adding to investor concerns about rising costs and margin pressure in the healthcare segment.

This article was AI-translated and verified by a human editor