Nasdaq 100, Bonds, and Gold Jump After Softer August Jobs Cut Points to Fed Cut

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

1. Nasdaq 100 E-mini futures(/NQ): +0.72%
2. 30-year T-Bond futures (/ZB): +1.2%
3. Gold futures (/GC): +0.79%
4. Crude Oil futures (/CL): -2.02%
5. Euro futures (/6E): +0.83%

A holiday-shortened week chock full of jobs data is coming to an end, and traders are squarely focused the possibility of Fed rate cuts through the end of the year. The August U.S. nonfarm payrolls report showed a meager +22K jobs added, below the already-weak forecast of +75K. To this end, the unemployment rate (U3) rose to 4.3% from 4.2%, as anticipated.

Once again, the big news wasn’t in the topline figures for August: revisions in recent months underscore the dramatic slowdown in the U.S. labor market. To wit: the final June payrolls reading was revised to -13K after initially being reported at +147K. The 56-month streak of U.S. jobs gains ended over the summer.

Traders have more-or-less locked in a September rate cut, whose odds rose from 95% to 97% following the jobs report. Greater movement is occurring in the odds around the October meeting however, with odds of a 25-bps rate cut rising from 47% ahead of the JOLTs report on Wednesday to 71% today following nonfarm payrolls.

Nasdaq futures (/NQU5) shrugged off a poor jobs report with equity traders instead focusing on a lower rate environment for stocks. Prices rose 0.72% in the first few minutes of cash trading. Broadcom (AVGO) surged over 15% higher after reporting positive earnings results after the bell on Thursday. Lululemon Athletica (LULU) sank 17% after offering weak guidance, pushing its stock price to the lowest levels since 2020. Guidewire Software(GWRE) rose 15% after beating revenue estimates.  

The jobs report sent yields lower across the curve this morning. Fed Funds futures are now pricing in a near 100% chance for a rate cut at this month’s Federal Reserve meeting. The data also boosted bets for more cuts later this year. 30-year T-Bond futures (/ZBZ5) rose over 1%, pushing prices above the July and August range to trade at the highest level since early May. Next week’s inflation numbers are the last big data print before the Fed’s meeting on September 17. 

Gold prices (/GCZ5) surged over 1% to trade at a fresh record high, extending this month’s rally to over 3%. The drop in yields and the dollar along with higher government spending is helping to fuel the bullish sentiment. Some forecasters are now calling for gold prices at the 5,000 level by next year. Silver prices (/SIZ5) were also higher but failed to clear the weekly high. 

Crude oil prices (/CLV5) fell 2% Friday morning. Prices are now trading near the August lows, as a weak labor market outlook dragged on demand expectations. OPEC+ members will meet this weekend when they’ll consider adding additional supply to the market by rolling back voluntary production cuts. Meanwhile, U.S. crude inventories are rising, and traders see a balanced market by the end of the year. The outlook for the U.S. oil market has softened considerably and a move below $60 per barrel would likely inject a sense of fear into the market. Oil companies like ConocoPhillips(COP) have already announced layoffs. 

Euro futures (/6EU5) rose nearly 1% after the U.S. jobs report crossed the wires. Traders expect the European Central Bank (ECB) to hold steady at next week’s meeting, while the Federal Reserve is likely to cut. This would benefit the yield differential for European bonds versus their counterpart U.S. yields. Sentiment indicators in Europe have strengthened recently and uncertainty over tariffs from the U.S. may force ECB members to remain patient rather than rushing to cut again. 

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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