S&P 500 and Bond Yields Steady After Mixed June Jobs Report

Also 10-year T-note, gold, crude oil and Euro futures

1. S&P 500 E-mini futures (/ES): 0% 

2. 10-year T-note futures (/ZN): +0.24% 

3. Gold futures (/GC): +0.53% 

4. Crude oil futures (/CL): +0.31% 

5. Euro futures (/6E): +0.37% 

The U.S. labor market remains strong, although some cracks are starting to appear. The nonfarm payrolls report showed a headline gain of 206,000 vs. the consensus forecast of 190,000. But that doesn’t tell the full story, which is why a “good” jobs report is not necessarily hurting stocks or bonds.  

The beat was hollow, as the two-month revision saw previous payrolls lose 111,000 jobs. The household employment survey indicated the unemployment rate (U3) rose to 4.1% against a forecast of holding at 4%, even as workers reported 116,000 more jobs than in May. The labor force participation rate increased from 62.5% to 62.6%. The wage figures confirmed signs of moderation. Average hourly earnings increased by 0.3% month ovef month (m/m) and 3.9% year over year (y/y), in line with expectations.  

Overall, the June U.S. jobs report produced an initial rally in both stocks and bonds as the combination of solid payrolls growth and easing wage pressure lifted odds of a Fed rate cut in September marginally from 74.5% to 78.7%. 

U.S. equity futures jumped after this morning’s non-farm payrolls report, with S&P 500 contracts (/ESU4) trimming its early morning losses to move into positive territory ahead of the New York open. The data promoted Federal Reserve interest rate cut bets for September. The passing of the NFP as a major event risk may also encourage bulls to push the market higher into the weekend. Next week will bring inflation data, which should help to further inform rate cut odds.  

It’s looking more likely the Fed will cut interest rates in September, and that is being reflected in Treasuries this morning. The 10-year T-note futures contract (/ZNU4) rose 0.27% ahead of the Wall Street open following the jobs report, which showed a 4.1% unemployment rate—the highest since October 2021. Bond traders will look for /ZN to clear the June swing high at 110’010 as the next major technical level. Next week brings inflation data as well as several potentially high-impact bond auctions.  

A softer dollar and falling Treasury yields are helping to propel gold prices higher along with silver and copper. Gold (/GCQ4) rose 0.53% this morning, pushing the metal above the late June swing high and opening the door for further upside on a technical basis. Traders have inflation data in focus as the next potential catalyst for precious metals, but today’s jobs data may help to support the case for higher gold prices until then.  

There is a lot of strength in oil prices lately, with crude oil futures (/CLQ4) on track to record a fourth weekly gain despite a modest pullback this morning. Traders were encouraged by this week’s report from the Energy Information Administration (EIA), which showed a 12.2 million barrel draw in U.S. inventories for last week, much higher than the anticipated 700,000 barrel draw. Meanwhile, Canada’s Suncor Energy (SU) suspended operations at its Firebag oil sands site because of the threat from wildfires. The situ operation produces 215,000 barrels of oil per day.    

The British Pound (/6B) is seeing relief after the Labour party’s largest margin of victory since Tony Blair took office in 1997, ending 14 years of Tory party rule and the smallest allocation of parliamentary seats in the Tory’s history. The shift back toward the center-left may be giving euro (/6EU4) traders some hope for Sunday’s French elections, where polls are indicating neither the far-left nor the far-right will gain an outright majority.  

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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