Wall Street Week Ahead: Investors watching US economic signs as market pulls back, tech teeters

NEW YORK: Investors will seek clues about the health of the US economy in the coming week following worrisome labor market reports and technology-led turbulence that has knocked the stock market off record highs.

The S&P 500 ended on Friday with a weekly decline after three straight weeks of gains. The benchmark index was last down about 2.4 percent from its all-time closing peak on October 28 even after a generally strong third-quarter earnings season for large US companies. This week, concerns about expensive equity valuations, especially for high-flying stocks linked to enthusiasm over artificial intelligence, were exacerbated by tepid jobs data, including a report that showed surging layoff announcements from US employers.

Alternative data released by private sector bodies have become more important for investors because the US federal shutdown that began on October 1 has limited government releases.

Investors were gauging whether the pullback in equities represented profit-taking and a healthy reset after an extended climb, or the start of a more severe slide. Fears that stocks are in an “AI bubble” have kept Wall Street on edge, with the benchmark S&P 500 up 14 percent year-to-date and 35 percent since its low for the year in April.

The S&P 500 technology sector, which has led the bull market that began more than three years ago, has been hit harder in this latest drawdown, falling about 6 percent since last week. A series of reports on Thursday suggested deteriorating US labor market conditions.

Data from workforce analytics company Revelio Labs showed 9,100 jobs were lost in October, while US employers’ planned layoffs soared to over 153,000 last month, global outplacement firm Challenger, Gray & Christmas said. The Chicago Fed estimated that the US jobless rate likely edged up in October to the highest in four years.

That data came a day after the ADP National Employment Report showed private employment rebounded by 42,000 jobs in October.

The Challenger layoffs report, combined with the lack of government jobs data, “raises a red flag in terms of whether or not the labor market has really stabilized,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Next week would have been a busy week of economic data, with government reports due on consumer and producer prices and retail sales. Those releases are poised to be delayed due to the shutdown. Investors will instead seek insight on the economy from traditionally more secondary reports, including the small business optimism index due to be released on Tuesday by the National Federation of Independent Business.