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(Bloomberg) — Stocks whipsawed ahead of US jobs data that will be key in determining the size of a Federal Reserve rate cut in September.

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In a session of several twists and turns, the S&P 500 edged lower. That’s despite a rally in a handful of big techs. Treasury yields fell slightly, with traders pricing in over 100 basis points in Fed easing this year — which implies a potential jumbo-sized reduction. Given Jerome Powell’s recent emphasis on the labor market, many on Wall Street say Friday’s US payrolls will dictate whether the Fed cuts by 25 or 50 basis points this month.

In the run-up to the figures, data showed US services expanded at a modest pace, with the Institute for Supply Management gauge little changed at 51.5. Readings above 50 indicate expansion. The employment index slipped to 50.2. Meantime, US companies added the fewest jobs since the start of 2021. And unemployment claims trailed estimates.

“After today’s mixed numbers, it’s up to tomorrow’s jobs report to give investors a clearer read on the state of the labor market,” said Chris Larkin at E*Trade from Morgan Stanley. “We’re in a ‘good news is good, and bad news is bad’ environment, and markets are still trying to figure out if the economy is slowing too much, and whether the Fed is behind the curve.”

The S&P 500 hovered near 5,510. The Bloomberg “Magnificent Seven” gauge of megacaps rose 1.7%. The Russell 2000 of small firms fell 0.4%. Treasury 10-year yields slid three basis points to 3.72%. The dollar fell.

Among corporate highlights, Nvidia Corp. climbed, with Bank of America Corp. analysts saying the recent plunge has created an “enhanced” buying opportunity. Tesla Inc. jumped on plans to launch the driver assistant in China and Europe. Broadcom Inc. will report earnings after the closing bell.

Following a disappointing jobs report last month, it’s no wonder that investors are “skittish” ahead of Friday’s data, particularly as we’re back in an environment where “good news is good news and bad news is bad news,” according to Bret Kenwell at eToro.

“While the odds currently favor a 25 basis-point cut at the Fed’s September meeting, a woefully disappointing jobs report could shift those odds to favor a 50 basis-point cut,” he said. “A 50 basis-point cut may seem like welcoming news for equity bulls. However, if the Fed feels forced to go right to a 50 basis-point cut, it may suggest there’s a bigger worry about the jobs market than previously acknowledged.”

Kenwell says that ideally, we should see a “better-than-feared” report on Friday, showcasing a labor market that has softened a bit — but isn’t weak — and allows the Fed to usher in a series of 25 basis-point rate cuts.

To Andrew Brenner at NatAlliance Securities, if the economy shows strength in nonfarm payrolls, equities should do better initially — but if rates “get slaughtered,” that won’t be good. Conversely, if rates rally because of a weak number, that won’t be good for stocks either.

“So we are in a tails we lose, heads we lose,” Brenner concluded.

The jobs report is expected to show payrolls increased by about 165,000, based on the median estimate in a Bloomberg survey of economists. While above the modest 114,000 gain in July, average growth over the most recent three months would ease to a little more than 150,000 — the smallest since the start of 2021.

A survey conducted by 22V Research shows most investors (44%) think the market reaction to Friday’s data will be “risk-on,” 27% said “risk-off” and 29% “negligible/mixed.”

The tally also underscored a notable shift — with the unemployment rate gaining more attention this month. Meantime, the focus on wage growth has dropped further. And 52% of respondents expect payrolls to beat the 165,000 projection.

To Stan Shipley at Evercore, Thursday’s ADP private employment tally and other labor-market metrics suggest a “soft payroll” for August.

“Tomorrow’s payroll report could be softer than expected given the slowdown in ADP estimates” said Jeffrey Roach at LPL Financial. “If the payroll report surprises investors and comes in weaker than expected, the likelihood of a 50 basis-point cut increases at the upcoming Fed meeting.”

While the ADP report has been a poor prognosticator of non-farm payrolls in recent years, its correlation to the print has been improving this year. This poses a risk for stocks into Friday’s jobs report.

To Dan Wantrobski at Janney Montgomery Scott, there are multiple technical gauges that are flashing warning signs. That’s why remains in “defensive mode,” anticipating further volatility ahead for stocks as we move through the September-October window.

“Both the S&P 500 and Nasdaq 100 are pressing further into oversold territory on a short-term basis, which implies they are coiled springs in the event that trading sentiment reverses sharply,” he said. “Tomorrow’s employment data could be a trigger for such a counter-trend move in our opinion. Would it be enough to completely negate the corrective cycle we currently find ourselves in? Most likely not.”

Corporate Highlights:

  • JetBlue Airways Corp. raised its sales forecast for the current quarter after the carrier said it benefited from re-booking passengers from rival airlines whose flights were disrupted by a technology outage in July.

  • C3.ai Inc., a data analysis software company, reported quarterly subscription revenue that missed estimates.

  • Hewlett Packard Enterprise Co. reported weaker-than-expected margins, suggesting lower profitability than anticipated in its closely watched business of selling servers for artificial intelligence work.

  • Verizon Communications Inc., which agreed to buy Frontier Communications Parent Inc. for about $9.59 billion in cash, said it’s focused on paying down debt as it works on closing the deal.

  • Paramount Global, the parent of CBS, will be controlled by software billionaire Larry Ellison after a group led by his son David completes its purchase of the Redstone family’s interest in the film and TV company, according to a regulatory filing.

Key events this week:

  • Eurozone GDP, Friday

  • US nonfarm payrolls, Friday

  • Fed’s John Williams speaks, Friday

Some of the main moves in markets:

Stocks

  • The S&P 500 fell 0.1% as of 2:11 p.m. New York time

  • The Nasdaq 100 rose 0.2%

  • The Dow Jones Industrial Average fell 0.3%

  • The MSCI World Index fell 0.1%

  • Bloomberg Magnificent 7 Total Return Index rose 1.7%

  • The Russell 2000 Index fell 0.4%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%

  • The euro rose 0.3% to $1.1112

  • The British pound rose 0.3% to $1.3184

  • The Japanese yen rose 0.3% to 143.26 per dollar

Cryptocurrencies

  • Bitcoin fell 2.5% to $56,593.37

  • Ether fell 2.6% to $2,390.42

Bonds

  • The yield on 10-year Treasuries declined three basis points to 3.72%

  • Germany’s 10-year yield declined two basis points to 2.21%

  • Britain’s 10-year yield declined two basis points to 3.91%

Commodities

  • West Texas Intermediate crude fell 0.3% to $68.99 a barrel

  • Spot gold rose 0.8% to $2,515.73 an ounce

This story was produced with the assistance of Bloomberg Automation.

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