Nasdaq 100: The U.S. added 336,000 jobs in September vs. the consensus forecast of 170,000

Also 10-year T-Note, Gold, Crude Oil, and Japanese Yen Futures

This Morning’s Five Futures in Focus:

1. Nasdaq 100 E-mini Futures (/NQ): -1.20%
2. 10-Year T-Note Futures (/ZN): -0.83%
3. Gold Futures (/GC): -0.11%
4. Crude Oil Futures (/CL): -0.11%
5. Japanese Yen Futures (/6J): -0.69%

A week focused on U.S. jobs data received its biggest surprise yet on Friday. The nonfarm payrolls report showed a headline gain of +336,000 vs. the consensus forecast of +170,000, while the prior reading was revised higher from +187,000 to +227,000. The household employment survey indicated that the unemployment rate (U3) held steady at 3.8%, as did the labor force participation rate at 62.8%. Wages (average hourly earnings) eased to +4.2% y/y vs. an expected rise of +4.3% y/y.

The exceptional beat relative to expectations (the actual reading was +5.6 standard deviations above the average estimate, and eclipsed all forecasts compiled by Bloomberg News) on headline jobs growth keeps the U.S. labor market on solid footing, perhaps to traders’ dismay. According to the Atlanta Fed Jobs Calculator, the U.S. economy only needs to add +105,000 jobs per month through the rest of 2023 and the unemployment rate would remain at 3.8%, the Federal Reserve's projection from their September policy meeting.

The net result has been a retread of what’s been seen over the course of the week, like the reaction to the release of the August US JOLTs report on Tuesday. Stocks, led by the Nasdaq 100 (/NQZ3), hit fresh session lows, while bonds fell across the curve. The U.S. Dollar jumped, led by weakness in the Australian Dollar (/6AZ3) and the Japanese Yen (/6JZ3).

U.S. equity index futures were smacked lower around the jobs report, as weakness set in across the bond market. Rising interest rates have been the bane of equity traders recently, and that’s no different today. /NQZ3 is leading the way lower, breaking its streak of resilience seen relative to its other counterparts in recent days. At the time this was written, stocks had begun rebounding off of their lows, reminding us of the old adage “don’t trust the first move around jobs data."

If the rebound in bonds this week was in part due to a belief that the U.S. economy was moderating, that narrative was obliterated on Friday after the jobs figures. Moderating wage growth may be seen as a positive, but revisions to data from prior months and the exceptionally strong headline figure proved to spark another aggressive move at the long-end of the curve, where 30s (/ZBZ3) and ultras (/UBZ3) are back on their wrecking ball path. Notably, however, Fed rate hike odds changed very little around the report, suggesting that traders don’t necessarily see the jobs data as materially impacting the odds of a rate hike in November or December.

Gold prices (/GCZ3) are falling deeper into seven-month lows after the U.S. jobs report sent bond traders fleeing, pushing yields higher and sapping the metal’s appeal. The labor data could force the Fed to hike rates again, which leaves a hard path ahead for gold prices. However, silver futures (/SIZ3) are slightly higher. It seems selling is hitting an exhaustion point, but the metal faces similar headwinds.

Crude oil prices (/CLZ3) are nearly unchanged this morning, trading between small losses and gains as traders assess how the jobs numbers will impact oil markets. Late Thursday it was reported that Exxon Mobil (XOM) is in talks with Pioneer Natural Resources to acquire the oil exploration firm. This may spark some buying across similar stocks and push the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) higher.

A stronger dollar, backed by surging Treasury yields, is weighing on the Japanese Yen (/6JZ3). This is pushing prices back toward a level where it is suspected that the Bank of Japan started ditching USDs to buy Yens earlier this week. Whether there was an actual currency intervention or not, the 0.006739 level will be key for watching price action.

Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx 

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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