S&P 500 Hits All-Time High Before Key Jobs Report: Markets Wrap

(Bloomberg) — Wall Street traders gearing up for Friday’s jobs report got a trio of data that reinforced the view of a cooling labor market, keeping bets on Federal Reserve rate cuts alive while driving stocks and bonds higher.

The latest readings on hiring and unemployment claims came on the eve of data that’s expected to extend the weakest stretch of US job growth since the pandemic. Treasury two-year yields fell to the lowest in about a year. Money markets almost fully priced in a Fed reduction this month and see at least two by year-end. The S&P 500 rose nearly 1% to an all-time high. In late hours, Broadcom Inc. gave an upbeat outlook.

Employers in the US showed little enthusiasm to take on workers during August, and the unemployment rate probably ticked up to an almost four-year high — adding to evidence of a more subdued labor market.

After lowering rates by a full percentage point last fall, Fed policymakers have held them steady this year out of concern that tariffs could reignite price pressures. But as risks to the jobs market become more apparent, officials are widely expected to slash borrowing costs in about two weeks from now.

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Bearing in mind the Fed’s dual mandate, there’s reason to believe Friday’s jobs report is the “single most-important” set of data that we’ll receive, according to Steve Sosnick at Interactive Brokers.

“Many investors are clearly hoping for rate cuts, but it is important to remember to be careful what we wish for,” he said. “Data that show a gently decelerating, but not dire labor market would suit that goal. Plunging data might bias the Fed to further cuts, but could also raise concerns that the central bank is too far behind the curve.”

The former extends the “Goldilocks” narrative, Sosnick said, while the latter raises concerns about “stagnation” or “stagflation.”

As traders positioned for the key jobs reading, President Donald Trump’s pick to fill a vacant seat on the Fed’s Board of Governors reiterated his commitment to central bank independence. Stephen Miran also added that the institution’s most-important job is preventing depressions and hyperinflation.

Read: US Job Growth Likely Tepid for Fourth Month, Supporting Rate Cut

In the run-up to the payrolls report, data showed US jobless claims rose to the highest since June. Private-sector payrolls increased by 54,000, according to ADP Research data, missing estimates. Hiring plans fell to the weakest level for any August on record, according to Challenger, Gray & Christmas.

“Even the most easing-skeptical officials should concede increasing risks of labor-market weakness,” said Will Compernolle at FHN Financial. “If this momentum continues into upcoming months, firms would soon be shedding workers faster than hiring them to the point of negative job growth.”

Nonfarm payrolls probably grew 75,000 in August, according to the median estimate in a Bloomberg survey of economists, which would mark a fourth straight month of job growth below 100,000. The unemployment rate is seen rising to 4.3% — the highest level since 2021.

‘Free Pass’

“The Federal Reserve’s free pass on the labor market has ended,” said Jamie Cox at Harris Financial Group. “You can expect the Fed to tilt its balance of risks to cut rates in September.”

Tomorrow’s jobs report will be the deciding factor, but so far this week, the data is confirming a slowdown in the labor market, according to Chris Larkin at E*Trade from Morgan Stanley.

“In the short term, markets may embrace that data because it should increase the odds of Fed rate cuts,” he said. “But if the numbers deteriorate too much, it could raise concerns about the health of the economy.”

Read: US PREVIEW: August Job Gains May Improve, But Jobless Risks Loom

The silver-lining is the weaker the jobs data the more cover there is for stimulative interest-rate cuts that are on the horizon, according to Eric Teal at Comerica Wealth Management.

“The boost in the latter half of this year should come from easier monetary policy and stimulative fiscal policies to avoid further economic deterioration,” he said.

In light of the latest ADP data, Ian Lyngen and Vail Hartman at BMO Capital Markets expect that a higher payrolls print will be dismissed, whereas a softer read will only extend the bond bullish sentiment at a moment when the bottom of the yield range appears poised to break.

“In the event of another leg lower in 10-year yields, we’ll be watching the 4.104% prior resistance ahead of the handle-change at 4.00%,” they said. “In the absence of confirmation via weaker payrolls, one should anticipate a period of consolidation to emerge, but not a wholesale reversal of the recent rally.”

A survey conducted by 22V Research showed that investor focus has dramatically shifted to payrolls after the weak number and large revisions last month.

According to the tally, 36% of respondents think the reaction to Friday’s data will be “risk-off,” 35% said “mixed/negligible” and 29% “risk-on.”

Lackluster employment figures released after the July central bank meeting have prompted greater concern, and Fed Chair Jerome Powell recently signaled a rate cut could be warranted, citing a “shifting balance of risks.”

Fed Governor Christopher Waller said in a speech last week that the data support the view that “labor demand may be on the edge of a sharp decline,” a trend he argued monetary policy should address.

Waller has been one of the most-vocal Fed governors favoring interest-rate cuts to guard against an outright deterioration in the job market. On Wednesday, he suggested the possibility of multiple reductions in borrowing costs by the end of the year.

Fed Bank of New York President John Williams said Thursday his forecast is that it will “become appropriate” to cut interest rates “over time,” without clarifying the timing or pace of such moves.

Separate data Thursday showed activity at US service providers expanded in August at the fastest pace in six months on the sharpest acceleration in orders in nearly a year.

The solid advance in those demand indicators suggests the largest part of the economy is gaining some traction after five straight months of sluggishness. Twelve services industries expanded last month, led by information, wholesale trade and arts and entertainment. Activity contracted in four industries.

Meantime, the US Justice Department opened a criminal investigation into whether Fed Governor Lisa Cook committed mortgage fraud — ratcheting up pressure in Trump’s bid to oust her from the central bank.

Federal prosecutors have issued subpoenas seeking information related to allegations that Cook misrepresented information on mortgage applications, according to people familiar with the matter, who asked not to be identified discussing the ongoing probe.

Read: Oil Falls on Concern OPEC+ May Boost Supplies at Weekend Meeting

Corporate Highlights:

Lululemon Athletica Inc.’s latest earnings report showed the yogawear retailer is struggling to pull out of a sales slump after years of rapid growth. Boeing Co. plans to start hiring permanent replacements for some of the 3,200 hourly workers on strike at its St. Louis defense hub, escalating tensions with no break in sight for the one-month-old labor impasse. The Trump administration is taking steps to make it easier for automakers to deploy-self driving cars by removing some requirements designed specifically for human drivers — like windshield wipers. Tesla Inc. said it has opened its robotaxi app to the general public, suggesting the company will soon roll out the service beyond a select group of early access users in Austin, Texas. General Motors Co. will start the launch of the Chevrolet Bolt electric vehicle in December with one shift at its plant in Kansas, less than the two shifts initially planned for the plug-in compact due to uncertain EV demand, the company said. Microsoft Corp. is set to avoid a potentially hefty antitrust fine after the European Union got positive feedback on the US software giant’s offer to settle a probe into the allegedly illegal bundling of its Teams video-conferencing app. Goldman Sachs Group Inc. will invest as much as $1 billion in T. Rowe Price Group Inc. and team up with the asset manager to sell private-market products to retail investors. American Eagle Outfitters Inc. skyrocketed on higher-than-expected quarterly sales, weeks after the jeans-maker found itself embroiled in a social media firestorm over its controversial Sydney Sweeney ad campaign. Paramount Skydance Corp. signed a three-year agreement to distribute Legendary Entertainment’s upcoming films in cinemas, the latest in a flurry of deals for the studio since new management took over weeks ago. OpenAI plans to launch a new AI-powered jobs platform next year to help match employers with candidates who have artificial intelligence skills in a bid to accelerate the technology’s deployment across businesses and government agencies. Some of the main moves in markets:

Stocks

The S&P 500 rose 0.8% as of 4 p.m. New York time The Nasdaq 100 rose 0.9% The Dow Jones Industrial Average rose 0.8% The MSCI World Index rose 0.8% Bloomberg Magnificent 7 Total Return Index rose 1.3% The Russell 2000 Index rose 1.3% Currencies

The Bloomberg Dollar Spot Index rose 0.1% The euro fell 0.1% to $1.1650 The British pound was little changed at $1.3435 The Japanese yen fell 0.3% to 148.49 per dollar Cryptocurrencies

Bitcoin fell 2.2% to $109,838.51 Ether fell 4.2% to $4,277.74 Bonds

The yield on 10-year Treasuries declined five basis points to 4.16% Germany’s 10-year yield declined two basis points to 2.72% Britain’s 10-year yield declined three basis points to 4.72% The yield on 2-year Treasuries declined three basis points to 3.59% The yield on 30-year Treasuries declined four basis points to 4.86% Commodities

West Texas Intermediate crude fell 1% to $63.35 a barrel Spot gold fell 0.3% to $3,550.16 an ounce ©2025 Bloomberg L.P.