Stocks and bonds saw gains as weak jobs data spurred expectations for a Federal Reserve interest rate cut in September. A drop in job openings to a 10-month low led traders to almost fully price in a Fed cut this month and project at least two reductions in 2025. This boosted Treasuries, which had seen a slide pushing the 30-year yield close to 5%, and also led to a fall in the dollar. Wall Street traders continued to bet on a September rate cut, supporting stocks and halting a two-day rout, particularly for big tech companies.
Economists, based on a Bloomberg survey, anticipate approximately 75,000 jobs were added in August, with the jobless rate expected to be 4.3%. A streak of four consecutive months with less than 100,000 payrolls growth would mark the weakest period since the onset of the pandemic in 2020. However, some Fed officials are less concerned about the slowdown in payrolls growth if it's accompanied by a decline in the participation rate, but they remain wary of lowering borrowing costs while inflation is gradually increasing.
Despite differing views within the Fed, with Governor Christopher Waller suggesting the central bank should begin lowering rates in September and make multiple cuts, analysts like Krishna Guha at Evercore believe the soft job-openings report significantly increases the likelihood of a September Fed cut. TD strategists, including Oscar Munoz and Gennadiy Goldberg, suggest that a large downside surprise in labor market data could push rates sharply lower, reinforcing their bias for rates to move lower throughout the year. The upcoming Friday jobs data will be a crucial input for Fed officials, who are currently anticipating a 25 basis point rate cut in two weeks.
