市场的暑假结束了

The jobs data for August due this week could set the tone for the rest of the year. A report showing strong hiring could give a huge lift to markets, while the opposite could set off new recession alarms and lasting volatility. 

Here is where specific markets stand ahead of a critical next few weeks.

Major U.S. stock indexes have been on a tear this year, with the S&P 500 up 18%, the Dow Jones Industrial Average up 10% and the Nasdaq Composite up 18%.

The S&P 500 has notched 38 record closes year to date after a drought in 2023.

Despite a sharp drop in early August, stocks are back near highs, making some analysts nervous that the market is due for a correction. Since the 1930s, the S&P 500 has experienced a decline of 10% or more once a year on average, according to Bank of America. That hasn’t happened yet this year. From its July high to August low, the S&P 500 only fell about 8%.

This year’s ascent has been mostly led by shares of tech giants, but the rally has widened in recent months. Investors have rotated into areas of the market that had lagged behind, such as smaller companies and more economically sensitive sectors.

The Russell 2000 index, made up of shares of smaller companies, and the S&P 500 Equal Weight Index, which gives the same status to companies of all sizes, have both outperformed the S&P 500 since the end of June.

Still, stocks look relatively pricey. Companies in the S&P 500 are trading at about 21 times their projected earnings over the next 12 months, above a 10-year average of roughly 18, according to FactSet.

The extra yield, or spread, that investors demand to hold corporate bonds over Treasurys offers insight into how worried investors are about the economy. Bigger fears lead to larger spreads to make up for the greater risk of corporate defaults.

Right now, investors don’t seem worried: Corporate bond spreads remain tight by historical standards. Spreads were wider in 2022 and 2023, when investors were more concerned the Fed would cause a recession while bringing inflation to heel. 

A recent widening of spreads caused by disappointing July jobs data has since been largely reversed. That suggests investors feel as though they need to see another month of bad data before they truly hit the sell button.

Yields on long-term Treasurys have been below yields on short-term Treasurys, an anomaly known as an inverted yield curve, for a record stretch. But that is close to reversing after short-term yields have fallen more than long-term yields in recent weeks.

That typically happens as the Fed gets closer to cutting interest rates when the economy has entered—or is on the verge of—a recession.

It isn’t clear how it will play out this time. 

Fed officials have said they plan to gradually cut rates as a precautionary measure, even if the labor market doesn’t show signs of additional weakness. That could result in a normalized yield curve without a recession. Alternatively, disappointing data could lead to more aggressive rate cuts and a more rapid decline in short-term yields, in a sign that history might be repeating itself. 

With borrowing costs projected to dip across the economy, Americans are also reaping the benefits of relatively calm energy markets. 

Natural gas this year has traded at some of the lowest levels of the shale era. That has cut down air-conditioning bills during summer heat waves, as well as the cost to generate electricity and manufacture fertilizer, steel and other building blocks of the economy. 

At the same time, wavering Chinese demand for crude has weighed down prices, pushing U.S. gasoline costs lower this summer. 

But there is uncertainty ahead. Wars are raging in Europe and the Middle East. The U.S. presidential election could shape the outlook for global trade. The Saudi-led Organization of the Petroleum Exporting Countries and its Russia-aligned allies are planning to gradually increase production starting in October.

In a recent note to clients, Goldman Sachs issued a warning: Expect more turbulence next year. 

Write to Sam Goldfarb at sam.goldfarb@wsj.com, David Uberti at david.uberti@wsj.com and Hannah Miao at hannah.miao@wsj.com