Jobs report — What to know in the week ahead

Heidi Chung

Political drama in Washington and the September jobs report take centerstage this week.

Last week, we learned President Donald Trump asked Ukrainian President Volodymyr Zelensky to dig up dirt on former Vice President Joe Biden and his son Hunter Biden. Shortly after the president’s admission, House Speaker Nancy Pelosi announced a formal impeachment inquiry. The drama in Washington is likely to continue for the foreseeable future. Though market strategists agree that the potential impeachment injects another dose of uncertainty into the markets, it doesn’t necessarily mean that stocks are doomed.

For instance, the markets reacted quite differently to the other two instances when a sitting U.S. president was impeached. “For equities, remember we’ve seen something like this twice and had two very different results,” Renaissance Macro’s Neil Dutta said in an email Tuesday. “During the Nixon saga, stocks were already tumbling (of course, we were going into recession) and kept falling after the formal inquiry process started. During the Clinton impeachment process, markets exploded to the upside as the economy boomed.”

Dutta argued that market fundamentals eventually matter more than political events.

October volatility

With October just around the corner and the fourth quarter kicking off, investors should brace for a wild ride. According to LPL Financial’s Ryan Detrick, if history is any indication, no other month has seen more 1% market moves in either direction for the S&P 500 (^GSPC) going back to 1950.

Though the impeachment inquiry may not affect the markets drastically, the legislative hold could impact markets. Specifically, lack of progress on the ongoing trade war may rock stocks in the upcoming month. The U.S. and China are scheduled to hold high level trade negotiations; however, it is unclear whether or not those talks will stake place in light of the political unrest in Washington.

Jobs report

Friday, investors will get a pulse on the U.S. labor market when the Labor Department releases September’s jobs report. Economists surveyed by Bloomberg are expecting that the U.S. economy added 140,000 nonfarm payrolls in August, up from the 130,000 jobs added in August. The unemployment rate is expected to have remained at 3.7%.

A 'Help Wanted' sign in a shop window in San Francisco, California. (Photo by Robert Alexander/Getty Images)

Despite adding fewer jobs than expected in August, the U.S. economy is still adding a healthy amount of payrolls even amid slowing global growth and escalating U.S.-China trade war. Wage growth has also been solid. Economists acknowledge that the labor market may be losing steam, but they argue that it doesn’t mean that the labor market is materially weakening. “The labor market overall does not show material signs of weakness,” Nomura wrote in a note to clients Friday. “Instead, we view the slowdown as consistent with waning economic momentum as fiscal stimulus fades and growth returns to potential.”

Capitol Economics pointed out that it is important to note that even as the General Motors (GM) strike rages on, it won’t affect the September jobs figures. “The ongoing strike by 46,000 auto workers at General Motors involves only a tiny share of the US workforce, but it is still likely to have a notable impact on the economic data,” the research firm wrote in a note Friday. “Not only has the strike halted production at all GM plants, which account for 20% of domestic vehicle production, but it is also forcing other firms further up the supply chain to shutter plants and lay off workers. The strike began too late to influence this month’s non-farm payrolls figures, but it is likely to result in a steep decline in manufacturing output.”

Meanwhile, investors can expect earnings reports from StitchFix, Lennar, Bed Bath & Beyond, PepsiCo, Constellation Brands, and Costco this week.

Economic calendar

Monday: MNI Chicago PMI, September (50.0 expected, 50.4 in August); Dallas Fed Manufacturing Activity, September (1.5 expected, 2.7 in August)

Tuesday: Markit US Manufacturing PMI, September final (51.0 expected, 51.0 prior); ISM Manufacturing, September (50.3 expected, 49.1 in August); ISM Prices Paid, September (50.5 expected, 46.0 in August); Construction Spending month-on-month, August (0.4% expected, 0.1% in July)

Wednesday: MBA Mortgage Application, week ended September 27 (-10.1% prior); ADP Employment Change, September (138,000 expected, 195,000 in August)

Thursday: Initial Jobless Claims, week ended September 28 (215,000 expected, 213,000 prior); Continuing Claims, week ended September 21 (1.650 million expected, 1.650 million prior); Bloomberg Consumer Comfort, week ended September 29 (61.7 prior); Markit US Services PMI, September final (50.9 expected, 50.9 prior); Markit US Composite PMI, September final (51.0 prior); Factory Orders, August (-0.5% expected, 1.4% in July); ISM Non-Manufacturing Index, September (55.0 expected, 56.4 in August); Durable Goods Orders, August final (0.2% prior); Durables excluding Transportation, August final (0.5% prior)

Friday: Change in Nonfarm Payrolls, September (140,000 expected, 130,000 in August); Unemployment Rate, September (3.7% expected, 3.7% in August); Average Hourly Earnings month-on-month, September (0.3% expected, 0.4% in August); Average Hourly Earnings year-on-year, September (3.2% expected, 3.2% in August); Trade Balance, August (-$54.6 billion expected, -$54 billion in July)

Earnings calendar

Monday: N/A

Tuesday: StitchFix (SFIX) after market close

Wednesday: Lennar (LEN) before market open; Bed Bath & Beyond (BBBY) after market close

Thursday: PepsiCo (PEP), Constellation Brands (STZ) before market open; Costco (COST) after market close

Friday: N/A

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Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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