US close: Stocks lower as traders await September payrolls report

At the close, the Dow Jones Industrial Average was down 0.44% at 42,011.59, while the S&P 500 lost 0.17% to 5,699.94 and the Nasdaq Composite saw out the session 0.04% weaker at 17,918.48.

The Dow closed 184.93 points lower on Thursday, easily reversing gains recorded yesterday in what was a rollercoaster session for major indices.

Escalating tensions in the Middle East continued to remain in focus on Thursday after Iran launched a missile attack on Israel after the latter launched a ground invasion into neighbouring Lebanon.

Both market participants and the Federal Reserve were also looking ahead to new jobs data, with the release of September's all-important payrolls report set for Friday morning.

On the macro front for Thursday, US employers announced 72,821 job cuts in September, according to Challenger, Gray & Christmas, down from 75,891 in August but markedly higher than last August's print of 47,457. The technology sector announced 11,430 cuts, while the healthcare and entertainment/leisure sectors announced 10,458 and 9,368, respectively.

Elsewhere, Americans lined up for unemployment benefits at an accelerated clip in the week ended 28 September, according to the Department of Labor. Initial jobless claims rose by 6,000 to 225,000, above market expectations for a reading of 220,000 for a new three-week high, supporting the belief that the Federal Reserve will implement interest rate cuts at every remaining meeting this year. Elsewhere, outstanding claims fell by 1,000 to 1.82m, while the four-week moving average for initial claims, which aims to strip out week-to-week volatility, declined by 750 to 224,250.

On another note, US factory orders eased by 0.2% month-on-month in August to $590.4bn, according to the Census Bureau, trimming last month's 4.9% downwardly revised jump and missing forecasts for an unchanged monthly reading. New orders for non-durable goods fell by 0.5% to $300.8bn, while new orders for durable goods were marginally higher at $289.6bn.

Finally, the Institute of Supply Management's services PMI surged to 54.9 in September, up from 51.5 in August and easily beating market forecasts for a reading of 51.7 – pointing to the strongest growth in the services sector since February 2023.

"The stronger growth indicated by the index data was generally supported by panelists' comments; however, concerns over political uncertainty are more prevalent than last month. Pricing of supplies remains an issue with supply chains continuing to stabilise; one respondent voiced concern over potential port labour issues. The interest-rate cut was welcomed; however, labour costs and availability continue to be a concern across most industries", said the ISM's Steve Miller.

In the corporate space, Levi Strauss shares traded lower after the jeans maker posted mixed Q3 results and said it was mulling over a sale of its loss-making Dockers unit.

Reporting by Iain Gilbert at Sharecast.com