By Lewis Krauskopf
NEW YORK, Aug 28 (Reuters) - A fresh look at the U.S. labor market in the coming week along with quarterly results from semiconductor company Broadcom will test a market rally that has lifted stocks near record highs.
The S&P 500 was on track for a weekly gain as of Thursday, putting the benchmark index within 1% of its August 13 all-time high. A blowout quarterly report on Wednesday from AI bellwether and market behemoth Nvidia boosted sentiment for stocks, which had been dented
earlier in the month by rising Treasury yields.
Investors were focused on the monthly U.S. employment report, due on September 4, and on whether the jobs data would offer hints about the U.S. Federal Reserve's plans for interest rates in coming months. Worries that the Fed may raise rates to tame high inflation have kept markets on edge.
"As we're starting to get closer to that September (Fed) meeting, each data print is going to be under the microscope as it may inform what the Fed ultimately does," said Michael Reynolds, vice president of investment strategy at Glenmede.
AUGUST JOBS DATA IN FOCUS
With August coming to a close, the S&P 500 was last up about 13% for the year. Strong corporate profit growth driven by massive spending on the AI infrastructure buildout is fueling the nearly four-year-old bull run in U.S. equities.
Markets have been relatively calm as summer ends in the U.S. The Cboe Volatility Index hovered near its low point for the year on Thursday, and daily market trading volume this week was well below its 2026 average.
Several upcoming events could shake assets, including the jobs data. Employment for August was expected to have climbed by 45,000 jobs, with the unemployment rate at 4.2%, according to a Reuters poll.
The July report showed a surprise labor-market weakening, with employment declining by 23,000 jobs.
"The last jobs report gave the market and investors a little bit of pause," said Amanda Agati, chief investment officer of PNC Asset Management Group.
However, Agati said she doubted there was a breakdown in the labor market, adding she would be looking for "either confirmation of that trend that we saw in the last report, or maybe a bounce back to prior months."
RATE PATH IN FOCUS WITH JOBS DATA
The jobs data could also indicate whether the Fed is likely to raise interest rates. Data this week showed inflation continued to run well above the U.S. central bank's 2% annual target.
Rate hikes pose several challenges for equity performance, including by raising borrowing costs for consumers and companies.
Fed funds futures on Thursday suggested a 35% chance of a hike at the next meeting in September, but investors were wary that a hot jobs report showing a big jump in employment and sharp wage growth could increase such bets.
"What the stock market wants to see is a continued number that gives the Fed the ability to remain on hold," said Matt Stucky, chief portfolio manager, equities, at Northwestern Mutual Wealth Management.
Other economic data in the coming week included reports on manufacturing and services sector activity. The prior monthly reading from the Institute for Supply Management showed U.S. manufacturing activity increased to the highest level in more than four years.
"Continuing that momentum into September we think is something that's really noteworthy to watch," Stucky said.
BROADCOM RESULTS DUE AS Q2 SEASON NEARS END
Wednesday's earnings report from Broadcom, whose market value was last over $1.7 trillion, will also be in focus, after rival semiconductor company Nvidia's results lifted equity indexes.
Nvidia forecast a whopping 70% jump in revenue for its next fiscal year. It was a rare disclosure for the AI bellwether, which typically does not issue such projections.
"We're just wondering whether or not Broadcom offers the same type of visibility," Stucky said.
Other reports are due next week from tech companies Dell Technologies and Palo Alto Networks. With the vast majority of companies having already reported, S&P 500 second-quarter earnings are on pace to have climbed 33.5% from a year earlier on an adjusted basis, according to LSEG IBES data as of August 21. The reporting season has demonstrated "really robust core earnings power," Reynolds said.
"If we continue to see that with the last few reports in the next week, I think that's really constructive for what the rest of the year looks like," Reynolds said.
(Reporting by Lewis Krauskopf in New York; Editing by Colin Barr and Matthew Lewis)
