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

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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.

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.

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