Summer Market Turbulence: The 5 Biggest Risks to Watch

Friday’s Jobs Report: A Key Test for the Stock Market

This spring’s steadier backdrop has pushed U.S. stocks to record highs, but Friday’s jobs report is one of three major risks that could disrupt the summer calm in markets.

The S&P 500 index (SPX) has risen more than 10% in 2024, with Wall Street’s fear index (VIX) and the bond market’s MOVE gauge both hitting their lowest levels since March 2022, when the Federal Reserve started raising rates.

Recent market stability is due to a “convergence” among investors who believe the Federal Reserve will cut rates no more than twice this year while achieving a soft landing for the U.S. economy, according to Jason Draho, head of asset allocation at UBS Financial Services.

Draho highlighted a “clear consensus view”: “Growth is slowing but not collapsing, inflation is stubborn but trending lower, and the bar for Fed rate cuts is low while hikes are effectively off the table,” he wrote in a Monday client note.

This view suggests investors expect minimal changes to benchmark rates this year, which Draho said could maintain market calm into late summer.

However, three near-term risks are on the horizon, starting with May’s jobs report due Friday.

Any “significant surprises relative to expectations” could be disruptive, as could May’s consumer-price index and the conclusion of the Fed’s next policy meeting, both set for June 12.

Stocks struggled for direction on Tuesday, following a turbulent session with trading glitches on the New York Stock Exchange. The Dow Jones Industrial Average (DJIA) was virtually unchanged, while the S&P 500 (SPX) and the Nasdaq Composite Index (COMP) both fell 0.2%, according to FactSet.