S&P 500 falls towards 4,250 points awaiting this week’s employment data

• S&P 500 falls more than 0.60% at the beginning of the American session on Tuesday.
• Hardline comments from the Federal Reserve point to “higher rates for longer.”
• This week, the focus will be on US employment data.

The index S&P 500 moves lower at the start of the American session on Tuesday. At the time of writing, the index is trading near daily lows, around 4,257 points and losing 0.68% on the day.

After avoiding a US government shutdown over the weekend, sentiment turns cautious on Tuesday amid a rising Fed hawkish expectations.

Late Saturday, the US Congress passed a temporary funding bill to temporarily avoid a government shutdown. The previous budget will be extended for 45 days and the government will have funds until November 17. This contributed to improved market sentiment on Monday and the S&P 500 ended with a slight gain of 0.07% on the day.

Data on Monday showed that the US ISM manufacturing Purchasing Managers’ Index (PMI) rose to 49 points in September from 47.6 the previous month, showing an improvement in the manufacturing sector but still remaining in contraction territory.

The chairman of the US Federal Reserve, Jerome Powellannounced Monday night that the central bank will move forward with careful decisions on rates and that they will remain high to get inflation down to 2%. Following recent figures from the Institute for Supply Management (ISM), it is clear that the US economy continues to endure these high rates.

Later, Loretta Mesterpresident of the Cleveland Fed, pointed out that Rates may have to be raised again this yearwhile Michelle Bowmangovernor of the Federal Reserve Board, noted that further rate increases probably necessary.

These hardline comments of “higher rates for longer” weigh on market sentiment on Tuesday and raise expectations of a further rate hike before the end of 2023. At the time of writing, CME Group’s FedWatch tool marks close to 45% chance of another rate hike by Dec. 13 Fed meeting.

Today’s focus will be on data from the August JOLTS job openings and labor turnover survey. It is expected that job offers remained above 8.8 million on the last day of August.

Later in the week, investors will continue to focus on US labor market data, with the release of the ADP report on the change in private sector employment in the US on Wednesday, weekly jobless claims on Thursday and non-farm payrolls (NFP) report) on Friday.

A new view on US jobs data could shape Fed officials’ expectations for interest rates and influence the new direction of financial markets.

S&P 500 technical levels