Investor Outlook: Key U.S. Labor Market Data to Test Soft Landing Hopes

Investor hopes for a soft landing in the U.S. economy will be tested next week with critical labor market data. Wall Street's S&P 500 index is up 20% year-to-date, bolstered by inflation control efforts and rate cuts by the Federal Reserve. Concerns remain about the sufficiency of rate cuts to prevent a downturn.

Investor hopes for a soft landing for the U.S. economy will be put to the test next week, as the government releases closely watched labor market data following a series of disappointing jobs reports. Wall Street's benchmark S&P 500 index is up 20% year-to-date near a record high. With the third quarter ending on Monday, the index is on track for its strongest January-September performance since 1997.

Hopes for a soft landing in which the Federal Reserve tames inflation without badly hurting growth, have helped drive those gains, along with a 50 basis point rate cut the central bank delivered at its monetary policy meeting this month. Some worry that the rate cuts may not be enough to avert a downturn, and Wall Street views the monthly employment report as one of the more critical reads on the economy. The prior two monthly reports have shown weaker-than-expected job increases, raising the stakes for the Oct 4 data.

For the September report due out next week, nonfarm payrolls are expected to have increased by 140,000, according to Reuters data on Friday. The labor data could help solidify views on the Fed's next move at its Nov 6-7 meeting. Futures tied to the fed funds rate currently show bets almost evenly split between a 25 basis point cut or another 50-basis-point reduction.

(With inputs from agencies.)