S&P 500, U.S. Dollar Jump as September Jobs Growth Beats Expectations

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

1. S&P 500 E-mini futures (/ES): +0.71% 
2. 10-year T-note futures (/ZN): -0.73% 
3. Gold futures (/GC): -0.28% 
4. Crude oil futures (/CL): +0.96% 
5. Japanese yen futures (/6J): -1.11% 

Rumors of the U.S. labor market’s demise have been greatly exaggerated. The September U.S. jobs report was better than expected on all counts, with previous reports seeing revisions high as well, all but putting to rest the discussion about whether the U.S. economy entered a recession over the summer.  

The latest batch of jobs data was good, no doubt. Headline jobs growth came in at a robust 254,000 vs. the 140,000 expected, while the July and August reports were revised higher by 72,000 jobs. The unemployment rate (U3) fell back to 4.1% from 4.2%, while wages surprised and came in at 0.4% higher month-over-month (m/m) and 4% higher year-over-year (y/y) vs. the expected 0.3% higher m/m and 3.8% higher y/y. 

The resiliency of the U.S. labor market is alleviating pressure in key indicators that suggest a slowdown is imminent. The Sahm rule indicator, which suggests a recession has started once the unemployment rate rises by more than 0.5% relative to the minimum of the three-month averages from the previous 12 months, has fallen to 0.5% from 0.57% last report. 

The data at the end of September and into the beginning of October is showing a clear trend: There was a summer slowdown, but the economy stabilized and started to pick back up heading into the fall.

Concurrently, traders are reading the economic tea leaves and have come to the conclusion this means the Federal Reserve will be more measured with their rate cuts moving forward—odds of a 50 basis-point (bps) rate cut in November fell from 32% yesterday to 5% today.

S&P 500 futures are nearly unchanged for the week after bulls entered the market following today’s jobs numbers. Spirit Airlines (SAVE) fell 33% after The Wall Street Journal reported the airline is in talks with creditors about filing for bankruptcy. Rivian Automotive (RIVN) fell about 5% in early trading after the company cut its production forecast.  

Treasuries fell across the curve after the jobs data surprised markets. The report underpins the economic strength in the U.S. economy and makes a case for a slower interest rate cut path by the Federal Reserve. The November decision is now slanted more toward a smaller 25bps reduction. The 10-year T-note futures contract is down the most on the day since Aug. 15, about 0.73% in early morning trading.  

Gold prices (/GCZ4) trimmed some of its weekly gains after the jobs data, dropping about 0.28% this morning. Prices remain about 0.15% higher on the week, which would mark the fourth week of gains for the metal if it holds. Traders have their eyes on positioning data due out later today. Last week, the Commodity Futures Trading Commission (CFTC) reported a rise in both longs and shorts. A much stronger dollar could eat into gold’s fundamental case if the greenback continues to rise next week.  

A strong labor market in the U.S. ignited demand hopes for crude oil, with the November contract (/CLZ4) up 0.58% this morning. That took the weekly gain to about 8.5%, marking the best weekly percentage gain since March 2023. Oil prices caught a bid earlier this week after President Biden didn’t push back when asked if the U.S. would support Israel striking Iran’s oil facilities. Meanwhile, there’s good news from Africa because Libya’s oil production is set to come back into force to about 1.2 million barrels per day after the eastern-based government and the Tripoli-based National Oil Corp. made a deal to end a dispute that shut down some production. 
 

The Japanese yen continued to sell today, with dollar strength driving the action. Earlier this week, Prime Minister Shigeru Ishiba said this environment does not support further interest rate increases. The price action may drive some speculators out of the long positions. Japanese yen traders will be watching that data due today from the CFTC. 

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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