Investors are eagerly awaiting the U.S. labor market report next week to gauge the economy’s health and potential interest rate cuts. A soft August employment report could signal a slowing economy, but lower rates may support the stock market. U.S. equities have hit record highs despite tariff concerns and tech stock fluctuations.

Stock indexes fell due to AI-related declines, but the S&P 500 ended August up 1.9%, near record highs. September historically sees S&P 500 declines, but the jobs report will be the first major economic release of the month. Expectations are for 75,000 job gains in August, signaling a cooling labor market.

Market expectations point to a 89% chance of a 25 basis point rate cut in September. A strong jobs report could change Fed’s rate cut plans, but the odds are low. The report may influence future rate cuts, with expectations of over 55 basis points of easing by December.

Trump’s attempt to fire Fed Governor Lisa Cook has raised concerns about Fed independence. The controversy has reignited concerns about political pressure on the central bank. Market participants are questioning previously assumed norms, widening potential tail risks in the market.

Read more at Yahoo Finance: US jobs data poses hurdle for rate-cut hopes, stocks rally