US stock market prepares for jobs report impact

(MENAFN) The stock market is gearing up for its first significant challenge of the year, with investors closely monitoring the upcoming US jobs report. They are hoping for data that reflects a stable economy, one that is not overheated, which would support expectations for equity gains in 2025. After a strong performance in December and the start of January, stocks showed signs of cooling off, creating some uncertainty heading into the new year.

The S&P 500 wrapped up 2024 with an impressive 23 percent rise, marking its largest two-year gain since 1997-1998. However, the outlook for a third consecutive strong year hinges on the continued strength of the economy, particularly the health of the labor market. Labor market data will be crucial for investors, as it could also provide insights into the Federal Reserve’s interest rate plans. The Fed recently surprised markets by reducing its forecast for rate cuts in 2025, adding to the importance of this economic data.

Anthony Saglimbene, chief market strategist at Ameriprise Financial, noted that investors are seeking confirmation that labor trends remain solid, which would indicate a firm economic outlook. He cautioned that any signs of economic weakening, even slightly more than expected, could introduce volatility into the markets.

Despite some recent volatility in labor market data, with disruptions from aerospace strikes and hurricanes, investors are generally optimistic about the US economy. A survey from Natixis Investment Managers found that 73 percent of institutional investors believe the US will avoid a recession in 2025. However, the three-month average gain of 138,000 jobs, as reported by Capital Economics, suggests that hiring is gradually slowing down, which could influence future market sentiment.

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