Average hourly earnings for all employees on private nonfarm payrolls in the U.S. rose by 10 cents, to $32.46 in September 2022. This is a monthly growth of 0.3%, which came in line with market forecasts and remained unchanged from August. The yearly average hourly earnings decreased to 5% from 5.20% in August and are well behind the annual rate of inflation.

Investors are scratching their heads if the slowing economy would influence the Federal Reserve to abandon its interest rate hikes earlier, and at a lower terminal level, than what the central banks is currently predicting. Whether this number will have a significant impact on the Fed’s monetary decision in November is unclear, but September’s CPI data scheduled to be released on 13th of October 2022 should provide more clues. Last week Fed officials kept repeating that they remain committed to tame inflation which is at 40-year high, with more rate hikes, even at the cost of tipping the economy into a recession. Fed officials warned against betting on an early ‘pivot’ from the central bank and signalled last month that additional 125-basis point increase by year end is on the cards.

Job openings were released earlier in the week showing a decline in August amid a slowdown in overall demand. The number of job openings has dropped by almost 2 million from the peak of 11.9 million in March when the Fed’s first-rate hike in the current cycle took place. Equity market took a reprieve rally on hopes the Fed might take its foot off the accelerator; however, such hopes on an interest rate pivot appears to be premature, as job openings continue to be elevated.

The U.S. weekly jobless claims were slightly higher than expected, indicating some softness in the labor market. However, the data is still overall low and is unlikely to interfere with the Fed plans to continue its aggressive rate hikes. With labor market still tight and unemployment rates close to multi-decade lows, anxiety among investors is growing over the possibility that the Federal Reserve won’t change its hawkish stance, even as evidence the U.S. economy is cooling.

The S&P 500 index which gives a better representation of the broader U.S. economy traded sharply lower on Friday and we see a good probability of the decline extending further in the next few trading sessions. The daily stochastic indicator has turned down from overbought levels supporting our view that another short-term decline is underway. Once the current down swing is complete a mild rebound could be seen as the weekly momentum readings are in oversold territory. Overall, the price structure and the momentum conditions are in poor state and our medium-term view on the market remains bearish. We see levels to 3,400 in the coming month(s) as easily achievable.