The Dow Jones Industrial Average (DJIA) is currently stuck in a sideways movement during the first week of October, influenced by geopolitical issues that are dampening risk appetite. Investors are positioning themselves ahead of the upcoming US Nonfarm Payrolls (NFP) jobs report due on Friday, as the Federal Reserve's future rate decisions may hinge on these labor statistics.
In September, the US ADP Employment Change figures exceeded most expectations, reporting a net increase of 143K jobs for the month. This was significantly above the median forecast of 120K, which followed a revised figure of 103K for August. Despite the positive advance in job numbers, investors remain cautious and are awaiting the official NFP figures on Friday.
Fed Chair Jerome Powell cautioned that the recent 50 basis point rate cut in September should not be interpreted as a signal for more drastic rate changes in the near future. The Fed's own Summary of Economic Projections indicates that only another 50 basis points in rate cuts are anticipated over the next few meetings. Rate markets have largely aligned with this outlook; the CME’s FedWatch Tool suggests a 60% probability of a subsequent 25 basis point cut in November, while 40% of traders are still hoping for another significant 50 basis point reduction.
In addition to the global market's perspective on Fed rate cuts, the outlook for domestic manufacturing has become uncertain due to a port worker strike affecting the East and Gulf Coasts, which is disrupting the flow of goods. Furthermore, tensions in the Middle East have escalated following Iran's missile strike on Israel in response to Israel's actions in Lebanon, leaving investors anxious about how Israel will react to this direct confrontation.
