Wall Street looks for direction after large downward jobs revision, focus on Fed's cuts

[NOUVEL YORK CITY, USA]

Wall Street's major averages were holding onto their gains before losing steam and turning red as payrolls were revised greatly lower. Investors continue to focus on rate cuts and upcoming inflation reports, slated to come this week.

The benchmark S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500]) was last -0.2% in late morning trade, while the Nasdaq Composite (COMP:IND [https://seekingalpha.com/symbol/COMP:IND]) was -0.3%, and the Dow (DJI [https://seekingalpha.com/symbol/DJI]) was -0.1%.

Over in the bond market, the 10-year Treasury yield (US10Y [https://seekingalpha.com/symbol/US10Y]) rose 4 basis points to 4.08%, while the 2-year yield (US2Y [https://seekingalpha.com/symbol/US2Y]) rose 4 basis points to 3.54%.

The Bureau of Labor Statistics published its preliminary benchmark revision [https://seekingalpha.com/news/4493395-us-jobs-gains-weaker-by-911k-in-year-through-march-bls-revision-show] to payrolls at -911,000 initially reported.

“The preliminary benchmark revision of -911K amounts to -0.6% to March 2025 payroll employment. Combined with 2-month revisions, recent total revisions are big but hardly unprecedented [and] smoothed over the business cycle the payroll survey has gotten more accurate over time,” said Ernie Tedeschi, director of economics at The Budget Lab, via X.com (formerly Twitter).

“The labor market was far weaker through the end of the year. In one way, it vindicates the Fed 100bps of rate cuts last year,” said Joseph Brusuelas, RSM U.S. principal and chief economist, also on X.

Traders are also awaiting the wholesale and retail inflation reports slated to land Wednesday and Thursday, respectively.

“What this week’s U.S. CPI and PPI inflation numbers will/won’t do with respect to some current questions/debates: The numbers won’t matter for what the Federal Reserve is very likely to do next week – namely, cut by 25 basis points. They will matter for the debate on what the Fed should be doing in the context of a tug of war between the risks to its dual mandate (employment risk versus inflation risk),” said Mohmed El-Erian, chief economic adviser at Allianz.

“They won’t resolve the ongoing debate on the inflationary impact of tariffs,” he added.

Also, on Tuesday’s economic calendar, the NFIB Small Business Optimism Index increased [https://seekingalpha.com/news/4493370-small-business-optimism-index-improves-more-than-expected-in-august] more than expected, 3 points above the 52-year average of 98.

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