(Thursday market close) Stocks were broadly lower again Thursday as investors confronted the potential ripple effects of an escalating conflict in the Middle East and a strike by dock workers here at home, even as they prepared for a key update on the jobs market tomorrow morning. Oil prices surged, adding to their gains since Iran launched missiles at Israel earlier this week. 
The September nonfarm payrolls report will show whether the economy has improved on the monthly average of around 116,000 jobs created over the summer. Analysts expect the economy to have added 140,000 jobs in September, down slightly from 142,000 the month before, and the unemployment rate to stick around 4.2%. A poor showing for September could reinforce expectations for a sharper rate cut when the Federal Reserve's rate-setting committee meets again in November.

Two other job reports Thursday showed more people filed for weekly initial jobless claims last week than the week before, while U.S. job-cut announcements were down slightly in September from the month before.

However, investors may struggle to isolate any single market driver at a time when the markets face so many potential sources of uncertainty.

"There are definitely several crosscurrents right now," said Schwab Senior Investment Strategist Kevin Gordon.

"The impact of the Middle East turmoil is showing up faster via oil prices and the outperformance of energy stocks, but I don't suspect that will last long given the macro forces that are still putting downward pressure on oil prices," he added. "For the workers' strike, it's too soon to tell what the impact will be on the economy, but I think there is a building risk of a near-term hit to GDP and payrolls if it lasts for a while. That means that any strength from tomorrow's payrolls print—if it's solid—might not elicit as much excitement."

"If the strike leads to a sizable, temporary hit to job growth for October—which we'll know by early November—then that just means we'll have to wait another month to see any of that weakness rewind," Gordon said. "It makes for an increasingly volatile backdrop in the next couple months."

Here's where the major benchmarks ended:
•    The S&P 500® index (SPX) fell 10 points (–0.17%) to 5,699.96; the Dow Jones Industrial Average ($DJI) dropped 185 points (–0.44%) to 42,011.59; the Nasdaq Composite® ($COMP) shed 7 points (–0.04%) to 17,918.48.
•    The 10-year Treasury note yield (TNX) added 7 basis points to 3.85%. 
•    The Cboe Volatility Index® (VIX) rose 1.7 points to 20.59.
Crude oil jumped again Thursday after President Biden suggested the United States could consider supporting an Israeli attack on Iranian oil facilities, according to a report in The Wall Street Journal. WTI Crude Oil futures (/CL) were up more than 5.5% Thursday afternoon.

Stocks on the move
The following companies had stock price moves driven by analyst ratings, quarterly earnings, or other news:
•    Constellation Brands (STZ) lost 4.70% after the maker of Corona and Modelo beers reported declining sales. 
•    Levi Strauss (LEVI) plunged 7.69% after delivering quarterly results and announcing it could sell its Dockers brand. 
•    Nvidia (NVDA) added more than 3% after CEO Jensen Huang said in an interview that demand for the company's next-generation artificial intelligence (AI) chips has been "insane." 
•    Stellantis (STLA) dropped 4%—and is now down nearly 45% for the year—after Barclays downgraded its rating on  the automaker behind the Chrysler and Jeep brands, while CEO Carlos Tavares suggested the company may have to cut its dividend next year. The company earlier reported shrinking sales in the United States. 
•    Palantir (PLTR) was up 4.7% after announcing a partnership with Edgescale AI to develop a new AI platform for industrial applications and utilities.
•    Tesla (TSLA) fell another 3.4% after recalling 27,000 cybertrucks over defective rearview cameras. It was the company's fifth recall of the year. The Magnificent Seven automaker also shed more than 3% Wednesday over apparent disappointment regarding its quarterly deliveries.
•    Valero Energy Corporation (VLO) was up more than 6% on the jump in energy prices, while Diamond Back Energy (FANG) was nearly 4% higher and Gulfport Energy (GPOR) gained 1.3%.

Data and more

While Friday's nonfarm payrolls report is the headlining data release this week, investors received some evidence Thursday that the labor market continues to cool.

Government data showed 225,000 people filed for weekly initial jobless claims in the week that ended September 28, up from a revised 219,000 the week before. Analysts polled by Trading Economics had expected 220,000. Last week's tally was a three-week high.

Separately, the September Challenger Job Cuts report, which tracks layoff announcements by U.S. employers, showed companies announced 72,821 cuts in September. That's down slightly from the month before, but 53% higher than September 2023. The Fed closely follows layoff trends.

Looking ahead to Friday's nonfarm payrolls report, investors may be particularly focused on pay data. Analysts expect average hourly earnings to have risen 3.8% in September from a year earlier—equal to August's annual gain—but to have edged up just 0.3% from the previous month, according to Trading Economics. That would be slower than August's 0.4% monthly pace.

If those numbers are correct, it would mean wages are easily keeping up with inflation and could help workers feel more confident about spending. Whichever way the report breaks, it is likely to shape expectations for the next Fed meeting in November.

Late Thursday, futures traders priced in a 67% chance the Federal Open Market Committee (FOMC) will cut rates by a quarter point at its meeting on November 6–7, based on the CME FedWatch Tool. The odds of a bigger 50-basis-point cut were about 33%. Just a week ago, investors were evenly split on which way the Fed might go following its jumbo 50-point cut in September.

Beyond the labor market, the ISM Services PMI® report for September blew past analysts' expectations, with the index rising to 54.9% from 51.5% the month before. Analysts were expecting a reading of 51.7%, according to Trading Economics. Any reading above 50 indicates an expansion.

"The increase in the Services PMI in September was driven by boosts of more than 6 percentage points for both the Business Activity and New Orders indexes," said Steve Miller, chair of the Institute for Supply Management® Services Business Survey Committee. "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 stabilize; one respondent voiced concern over potential port labor issues," Miller added. "The interest-rate cut was welcomed; however, labor costs and availability continue to be a concern across most industries."