NEW YORK - Investors will closely watch next week’s inflation numbers and Federal Reserve meeting for clues on whether the soft landing hopes that drove stocks to record highs are still justified.
Nonfarm payrolls increased by 272,000 jobs last month, the Labor Department's Bureau of Labor Statistics said on Friday, exceeding 185,000 jobs forecast by economists in a Reuters poll. After the data, futures markets showed investors trimming expectations for rate cuts, with chances of a September cut falling to about 55% from about 70% before the report.
U.S. stock valuations remain well above historic norms, noted Ed Clissold, chief U.S. strategist at Ned Davis Research. The median price to earnings ratio of the S&P 500 would need to fall 31% to hit its long-term median, and 19% to reach its 20-year norm, he said."People are concerned about how far and how high this market has risen and how narrow it has been," said Raul Diaz, senior investment officer at Northern Trust Wealth Management.
The bank recently upgraded its year-end S&P 500 target to 5,500, up 3% from where the index trades today.