US Jobs Report and Inflation Data Set to Test Interest Rate Path

Investors are bracing for key reports on employment and inflation in the coming week, which could have significant implications for interest rates and the US stock market.

The monthly jobs report, due out on October 2, will be closely watched to gauge the strength of the labor market and its potential impact on consumer spending. A Reuters poll of economists predicts a gain of 100,000 jobs and an unemployment rate of 4.2 percent.

A strong jobs report could further solidify expectations for another interest rate hike by the Federal Reserve in October, which would be a blow to the stock market. The Fed hiked rates by a quarter percentage point on September 16 and signalled that more rate increases are coming before the year is out.

Meanwhile, the personal consumption expenditures price index (PCE) will offer insight into inflation trends. If the PCE index continues to run above the central bank's 2.0 percent target, it could lead to further interest rate hikes and higher borrowing costs.