(Bloomberg) — Stocks fell at the start of a tough month for the market, as traders braced for a deluge of data that could shed light on the health of the world’s largest economy.

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Wall Street traders have been trimming some risk after a rally that pushed the S&P 500 near an all-time high. U.S. manufacturing activity fell for the fifth straight month in August, reflecting faster declines in orders and production. The report marks the start of a busy week of economic data, culminating in Friday’s all-important jobs report.

“Concerns over the recent rise in the unemployment rate will keep the market on edge until the data is released on Friday morning,” said Ian Lyngen and Vail Hartman of BMO Capital Markets. “While there is significant event risk in the data released before Friday, Friday’s release will ultimately determine the understanding of the current state of the labor market.”

The Morgan Stanley strategist who predicted last month’s market correction says stocks that have lagged the rally in U.S. equities could see a rebound if data due Friday provides further evidence of a robust economy.

Better-than-expected employment numbers would likely give investors “greater confidence that risks to growth have abated,” Michael Wilson, chief U.S. equity strategist at the bank, wrote in a research note.

The S&P 500 lost 1%. The Nasdaq 100 slipped 1.5%. Nvidia Corp. led losses among chipmakers. Energy stocks were hit as Brent oil fell below $75, wiping out its 2024 gains. Boeing Co. tumbled after an analyst downgrade. The Russell 2000 of smaller companies lost 1.2%.

Yields on 10-year US government bonds fell by six basis points to 3.84 percent. Around 29 issuers plan to sell new investment-grade US bonds on Tuesday, according to an informal survey of bond insurers. The Japanese yen rose by 1 percent against the dollar.

U.S. stocks led the net sell-off in global equities last week as hedge funds reduced their long positions, according to Morgan Stanley’s weekly prime brokerage data on August 29.

For hedge funds, however, it’s time to prepare for what could be a volatile month. According to the Stock Trader’s Almanac, both the S&P 500 and the Dow Jones Industrial Average posted their largest percentage losses since 1950 in September.

Even if the Fed begins a much-anticipated rate-cutting cycle, the rally in equity markets could stall near record highs, say strategists at JPMorgan Chase & Co.

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The team led by Mislav Matejka – one of the most pessimistic equity analysts this year – explained that any easing of monetary policy would be a response to slowing growth and thus represent a “reactive” cut.

Upcoming U.S. jobs data will tell policymakers whether further rate cuts are needed after a cut seemed all but certain in just over two weeks.

Next Friday, the August jobs report is expected to show a rise in employment in the world’s largest economy of about 165,000, according to the median estimate of a Bloomberg survey of economists.

While average job growth over the past three months is above the modest 114,000 gain in July, it is expected to decline to just over 150,000 – the lowest level since early 2021. The unemployment rate likely fell slightly in August, from 4.3% to 4.2%.

Company highlights:

• Southwest Airlines Co. rose after Evercore ISI upgraded the company’s performance to “outperform” from “inline.”

• Vice President Kamala Harris joined President Joe Biden in saying that United States Steel Corp. should remain domestically owned and operated, the latest headwind to the company’s planned sale to Japan-based Nippon Steel Corp.

• Deutsche Bank AG downgraded its recommendation for JPMorgan Chase & Co. from “buy” to “hold” and upgraded its recommendations for Bank of America Corp. and Wells Fargo & Co. due to changing preferences in the banking sector.

• Illumina Inc.’s blocked $7 billion bid for cancer detection company Grail Inc. should never have been reviewed by the European Union, according to a top court ruling that goes to the heart of the EU’s attempt to scrutinize more global deals.

• The inspection of Cathay Pacific Airways Ltd.’s Airbus SE A350 fleet is focusing on deformed or damaged fuel lines in the wide-body aircraft’s engines. The discovery of the problem resulted in numerous flight cancellations as technicians had to replace parts.

Important events this week:

• China Caixin Services PMI, Wednesday

• Eurozone HCOB Services PMI, PPI, Wednesday

• Interest rate decision Canada, Wednesday

• US Job Openings, Factory Orders, Beige Book, Wednesday

• Retail sales in the Eurozone, Thursday

• US initial jobless claims, ADP employment, ISM services index, Thursday

• Eurozone GDP, Friday

• US non-farm labor market statistics, Friday

• Speech by Fed Chairman John Williams on Friday

Some of the key market movements:

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• The S&P 500 fell 1% at 10 a.m. New York time

• The Nasdaq 100 fell 1.5 percent

• The Dow Jones Industrial Average fell 0.8 percent

• The Stoxx Europe 600 lost 0.9 percent

• The MSCI World Index fell by 0.9 percent

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro fell 0.2 percent to 1.1055 dollars.

• The British pound fell 0.2% to $1.3116.

• The Japanese yen rose 0.9% to 145.58 per dollar

Cryptocurrencies

• Bitcoin fell 1.2% to $58,275.67

• Ether fell 3.7% to $2,460.87

Bonds

• The yield on 10-year government bonds fell six basis points to 3.84%.

• The yield on German 10-year bonds fell by six basis points to 2.28 percent

• The yield on British 10-year bonds fell by eight basis points to 3.98 percent

Raw materials

• West Texas Intermediate crude oil fell 3.7 percent to $70.81 a barrel

• The spot price of gold fell 0.9 percent to $2,476.73 an ounce.

This story was created with the assistance of Bloomberg Automation.

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