- Stocks are likely to look beyond Friday's surprisingly soft August jobs report and latch onto the latest data on labor and inflation in the coming week's jobless claims and producer price index.
- The post-Labor Day market week could be sluggish, as activity comes back slowly after the late August period.
- Profit growth has been a powerful engine for stock market gains, and strategists expect earnings to continue to be a positive in the face of other potential negatives.
Traders on the floor of the New York Stock Exchange, June 18, 2021.Source: NYSE
After a weak jobs report, strategists say investor focus may stay on strong profit growth rather than other potential negatives.
Stocks were mixed in the past week ahead of the long Labor Day weekend, with the Nasdaq outperforming, the S&P 500 rising slightly and the Dow flat. The best-performing sectors were on the defensive side, led by real estate investment trusts, utilities, consumer staples and health care.
"You've got this Labor Day effect. People are back from vacation" in the coming week, National Securities chief market strategist Art Hogan said.
Hogan said investors expect the trading activity to pick up as a result, but it typically remains slow in the holiday shortened-week. Investors may assess their summer performance and move to lock in gains or add hedges.
"If you look back at the last five post-Labor Day weeks that have happened with the market near all-time highs, the post Labor Day week is the worst for September," Hogan said.
Friday's disappointing August jobs report — with just 235,000 jobs added — was a dampener for sentiment, but stocks were mixed.
"My outlook for the last several weeks is sideways to moderately higher, and that seems where they're headed. There isn't a lot of bearish data accumulating. At worst we go sideways," said Randy Frederick, Charles Schwab managing director of trading and derivatives.
Frederick said even with worries about the weaker jobs and Covid,-19 investors may continue to focus on profits. Economists blamed the spread of the Covid delta variant for the weaker than expected jobs report.
Strategists say other issues for stocks in September could include the efforts in Congress to pass infrastructure legislation and possible new taxes.
Frederick said he expects the market to look beyond the August employment report, which was about 500,000 lower than expected.
"I don't think there's spillover much into next week for the most part," he added. "The markets are down a little bit, but I think they've taken it in stride better than might be expected."