All three indexes spent almost all day deeply in the red, the Dow down some 300 points, before rebounding in the final minutes and starting a rally presumably triggered by new found optimism that Friday’s labor report would show a weakening labor market, which is what they want. Or as some other analysts have said – perhaps investors finally decided that it was time to pick up some bargains after four days of losses.  They’re both probably right and if tomorrow’s report does show a weakening market, that rally should continue big time on Friday to close out the week.  

(And maybe September won’t be the terrible month it historically has been after all.)  The S&P has lost 6% since Friday and, despite the gains, most of the uptick was in defensive sectors with tech continuing to suffer losses.  The forecast for Friday is 300,000 new jobs though some experts estimate closer to 375.  What is unclear is what number will make everyone happy.  New reports showed a continued easing in inflation and that manufacturing and new orders are growing. Volume was above average at 11.2 billion. 

Thu  September 1, 2022  4:18 PM

S&P 500 snaps four-session losing streak with payrolls on deck

By Chuck Mikolajczak

DJ: 31,510.43  -280.44        NAS: 11,816.20  -66.93        S&P: 3,955.00  -31.16      8/31

DJ: 31,656.42  +145.99       NAS: 11,785.13  -31.08        S&P: 3,966.85  +11.85     9/1

NEW YORK, Sept 1 (Reuters) - A late rally helped the S&P 500 snap a four-session losing skid on Thursday with investor focus turning to a key report on the labor market on Friday.  Stocks had been solidly lower for most of the session, after data showed weekly jobless claims fell more than expected to a two-month low last week and layoffs dropped in August, giving the Fed a cushion to continue raising rates to slow the labor market. Investors now await the monthly nonfarm payrolls report on Friday for more evidence on the labor market. read more  Economists polled by Reuters see a jobs increase of 300,000, while Wells Fargo economist Jay Bryson revised his forecast for nonfarm payrolls to 375,000 from 325,000 and Morgan Stanley economist Ellen Zentner expects August payrolls of 350,000.

"Today's market is about tomorrow morning. You've got a market that is oversold ... and a catalyst for a rally or at least not to sell off would be a weaker employment report especially with regard to wages," said Quincy Krosby, chief global strategist for LPL Financial in Charlotte, North Carolina.  "The market is as data-dependent as the Fed. It's going to be on guard for every data release that could suggest when the Fed could be closer to finishing."  The S&P managed to bounce in the latter stages of trading after hitting a low of 3,903.65, near what some analysts see as a strong support level for stocks at 3,900.

The Dow Jones Industrial Average (.DJI) rose 145.99 points, or 0.46%, to 31,656.42; the S&P 500 (.SPX) gained 11.85 points, or 0.30%, to 3,966.85; and the Nasdaq Composite (.IXIC) dropped 31.08 points, or 0.26%, to 11,785.13.

The benchmark S&P index has stumbled nearly 6% over the prior four sessions, which began after Fed Chair Jerome Powell signaled on Friday the central bank will remain aggressive raising rates to fight inflation even after consecutive hikes of 75 basis points, a message echoed by other Fed officials in recent days.

Despite the gains, the tone was defensive, with healthcare (.SPXHC) up 1.65%, and utilities (.SPLRCU), which gained 1.42%, the leading sectors to the upside.  Weighing on the tech sector (.SPLRCT), down 0.48%, were chipmakers as the Philadelphia semiconductor index (.SOX) dropped 1.92%, led by a 7.67% tumble in shares of Nvidia (NVDA.O) as the biggest weight on the S&P 500, and a 2.99% fall in Advanced Micro Devices (AMD.O) after the United States imposed an export ban on some top AI chips to China. read more

Other economic data showed a further easing in price pressures, while manufacturing grew steadily in August, thanks to a rebound in employment and new orders.  Traders expect a 73.1% chance of a third straight 75 basis points increase in rates in September and expect it to peak around 3.993% in March 2023.

The expected path of Fed rate hikes has increased worry the central bank could potentially make a policy mistake and raise rates too high, tilting the economy into a recession, even if inflation shows signs of abating.  Investors have also become more concerned about corporate earnings in a rising rate environment that has also stoked a rally in the U.S. dollar. Hormel Foods Corp (HRL.N) fell 6.56% after the packaged foods maker cut its full-year profit forecast.

Volume on U.S. exchanges was 11.19 billion shares, compared with the 10.51 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 2.82-to-1 ratio; on Nasdaq, a 1.96-to-1 ratio favored decliners.  The S&P 500 posted one new 52-week high and 35 new lows; the Nasdaq Composite recorded 29 new highs and 356 new lows.