Jobs data pivotal for US stocks

After posting solid gains in September, U.S. stocks are once again near all-time highs. But a significant hurdle in the form of monthly payroll data must be cleared next week if the advance is going to carry over to the fourth quarter.

At Friday's closing bell, all three major U.S. stock indexes had booked strong gains for September. The Dow Jones industrial average (.DJI: Quote, Profile, Research) climbed 4.0 percent for the month, while the Standard & Poor's 500 Index (.SPX: Quote, Profile, Research) advanced 3.6 percent and the Nasdaq Composite Index (.IXIC: Quote, Profile, Research) rose 4.1 percent. It was the best September for the S&P since 1998.

On Friday, the September payroll data is due. In a Reuters poll of economists, the median forecast has 94,000 jobs being added to non-farm payrolls, and the jobless rate rising to 4.7 percent from 4.6 percent.

In contrast, August non-farm payrolls shrank by 4,000 jobs, a surprise that undoubtedly persuaded the Fed to cut interest rates by one-half percentage point on September 18.

"The payroll report is the major thing that a lot of investors are going to focus on, particularly since the August number was so far below expectations," said Brandon Thomas, chief investment officer of Portfolio Management Consultants, a unit of Envestnet Asset Management, in Chicago.

Thomas noted that recent declines in weekly jobless claims may be signaling a healthy jobs report for September. He expects 115,000 new jobs and a jobless rate unchanged at 4.6 percent.

"If the numbers are too strong, the Fed may take a 'wait-and-see' attitude," Thomas said. That would disappoint those hoping for another rate cut at the October 30-31 policy meeting.


Jobs data pivotal for US stocks

9/30/2007 9:23:00 AM