Nonfarm payrolls due tonight: after the sharp drop in U.S. stocks, how is the market betting on a December rate hike?
The U.S. October nonfarm payrolls report is due out tonight. It could be one of the key data releases to influence the direction of global risk assets in the near term.
The market is at a delicate juncture: on one hand, U.S. tech stocks have come under significant selling pressure, with valuation pressures in the AI sector continuing to unwind; on the other, expectations of a December Fed rate hike remain elevated, and concerns about further monetary tightening have not fully faded.
First, tonight’s key data:
1. Nonfarm payrolls: The market expects an increase of 65,000, versus 29,000 previously.
2. Unemployment rate: The market expects it to hold at 4.2%.
3. Average hourly earnings, month over month: The market expects an increase of 0.3%.
4. Average hourly earnings, year over year: The market expects growth to slow to 2.9%.
Bets on a December rate hike remain relatively high, but the recent sharp decline in U.S. stocks and the return of safe-haven flows to Treasuries have also caused expectations to soften somewhat.
In my view, there are three key things to watch tonight:
First, nonfarm payrolls come in stronger than expected.
If job growth significantly exceeds 65,000 while the unemployment rate does not rise, and wage growth remains strong, that would suggest the U.S. labor market is still resilient, strengthening the case for the Fed to maintain its restrictive policy.
In that scenario, the dollar and Treasury yields could strengthen again, putting some pressure on BTC, ETH, and growth stocks.
Second, nonfarm payrolls come in weaker than expected.
If job growth falls well short of expectations, the unemployment rate rises, and wage growth slows at the same time, the market may once again trade on the prospect of a cooling economy and a shift in monetary policy.
The dollar and Treasury yields could come under pressure, giving risk assets a chance to recover.
Third, the data are mixed.
This is actually the scenario most likely to trigger market volatility.
For example, job growth could be solid while wage growth slows, or payrolls could be weak while the unemployment rate shows no significant deterioration. In either case, the Fed will need to assess the data alongside inflation and other labor market indicators.
You cannot determine the direction of interest rates in December based on a single nonfarm payrolls figure.
My view:
The biggest risk facing the market right now is not just the decline in U.S. stocks, but the combination of expectations for high interest rates and valuation adjustments in tech stocks.
$BTC
The U.S. October nonfarm payrolls report is due out tonight. It could be one of the key data releases to influence the direction of global risk assets in the near term.
The market is at a delicate juncture: on one hand, U.S. tech stocks have come under significant selling pressure, with valuation pressures in the AI sector continuing to unwind; on the other, expectations of a December Fed rate hike remain elevated, and concerns about further monetary tightening have not fully faded.
First, tonight’s key data:
1. Nonfarm payrolls: The market expects an increase of 65,000, versus 29,000 previously.
2. Unemployment rate: The market expects it to hold at 4.2%.
3. Average hourly earnings, month over month: The market expects an increase of 0.3%.
4. Average hourly earnings, year over year: The market expects growth to slow to 2.9%.
Bets on a December rate hike remain relatively high, but the recent sharp decline in U.S. stocks and the return of safe-haven flows to Treasuries have also caused expectations to soften somewhat.
In my view, there are three key things to watch tonight:
First, nonfarm payrolls come in stronger than expected.
If job growth significantly exceeds 65,000 while the unemployment rate does not rise, and wage growth remains strong, that would suggest the U.S. labor market is still resilient, strengthening the case for the Fed to maintain its restrictive policy.
In that scenario, the dollar and Treasury yields could strengthen again, putting some pressure on BTC, ETH, and growth stocks.
Second, nonfarm payrolls come in weaker than expected.
If job growth falls well short of expectations, the unemployment rate rises, and wage growth slows at the same time, the market may once again trade on the prospect of a cooling economy and a shift in monetary policy.
The dollar and Treasury yields could come under pressure, giving risk assets a chance to recover.
Third, the data are mixed.
This is actually the scenario most likely to trigger market volatility.
For example, job growth could be solid while wage growth slows, or payrolls could be weak while the unemployment rate shows no significant deterioration. In either case, the Fed will need to assess the data alongside inflation and other labor market indicators.
You cannot determine the direction of interest rates in December based on a single nonfarm payrolls figure.
My view:
The biggest risk facing the market right now is not just the decline in U.S. stocks, but the combination of expectations for high interest rates and valuation adjustments in tech stocks.
$BTC