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What’s next for S&P 500 after U.S. private payrolls monthly update?

on Oct 5, 2022
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  • U.S. private payrolls increased more than expected in September.
  • CFRA's Sam Stovall says the S&P 500 could crash to 3,200 level.
  • The benchmark index is up 4.0% versus its YTD low on last Friday.

S&P 500 is back in the red this morning on a report indicating the U.S. labour market remained tight in September.

ADP non-farm employment change monthly update

Private payrolls went up by 208,000 last month versus 200,000 expected – feeding right into the narrative that the Federal Reserve needs to remain hawkish.

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That could mean more pain for the benchmark index in the coming months. On CNBC’s “Squawk on the Street”, Sam Stovall (Chief Investment Strategist at CFRA Research) said:

I’d say that while five of the last bear markets since 1950 ended in October, I still think we have a ways to go. We’re down 25% but bear markets with recessions usually decline about 35% and they do so over a 15-month period.

Figure for August was also upwardly revised to 185,000 on Wednesday.

S&P 500 could go further down to 3,200 level

Goods-producing industries lost 29,000 jobs in September, but that was more that offset by a gain of 147,000 in trade, transportation and utilities. Stovall added:

While we do have these relief rallies, I think we’re likely to continue in a downward mode until the first quarter of next year, with a number of close to 3,200 on the S&P 500 index.

That will contract the price-to-earnings multiple on the benchmark index to 14.9 (down one-third) – a feature of bear markets with recession, according to the CFRA expert. For now, though, SPX is up 4.0% versus its year-to-date low on the past Friday.

Annual pay was up 7.8% in September versus a revised 7.7% in August.