Monday is a bank holiday in the US and Canada for Labour Day. This could produce some volatility as there is often lower liquidity on holidays; however, Labour Day in the US is officially the end of the lower volumes associated with “Summer Trading”.
US30: Daily Chart
The US30 trades at 34,837 after a push higher last week. The 35,000 level is the next test, with 34,000 on the downside.
As traders return from the annual summer vacation period, we could see volumes increase and larger moves, with the possibility of either or both of those support or resistance levels being tested.
Last week was disappointing for US economic data, with a rise in unemployment and lower GDP growth figures. However, that raises the likelihood of a Federal Reserve rate pause, and that could be bullish.
ISM manufacturing will be closely watched this week on Wednesday, while a return of COVID to the news cycle should also be a concern for growth outlooks.
“We are beginning to see this slow glide into a cooler labour market,’’ said Becky Frankiewicz at employment firm ManpowerGroup. “Make no mistake: Demand is cooling off. But it’s not a freefall.’’
The latest sign that hiring is losing some momentum would likely be welcomed by the Federal Reserve, which has been trying to cool inflation with eleven interest rate hikes. The Fed is hoping to achieve a “soft landing,” where hiring and growth slow enough to cool price increases without triggering a recession. Economists have doubted that the Fed would succeed.
The ISM manufacturing number could boost stocks if it follows the current tone that the economy is slowing without a freefall scenario.
The next Federal Reserve interest rate meeting falls on September 20, and markets will have almost three weeks to watch further economic data for clues on the next path. The US earnings calendar is light this week with only a few mid-level tech stocks releasing their results, so traders should look at Tuesday onwards for a return of volume that could act on recent data from the holidays.
