S&P 500 and Nasdaq 100 Jump After October U.S. Jobs Report

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

1. S&P 500 E-mini futures (/ES): +0.43%
2. 10-Year T-Note futures (/ZN): +0.73%
3. Gold futures (/GC): +0.92%
4. Crude oil futures (/CL): +1.27%
5. Euro futures (/6E): +0.79%

Following clear signs earlier this week that the Federal Reserve was finished with its rate hike cycle, the U.S. labor market offered convincing evidence that the cumulative impact of the tightening efforts thus far are beginning to show up in the data. 

The nonfarm payrolls report (NFP) showed a headline gain of 150,000 vs. the consensus forecast of 180,000—though it should be noted the United Auto Workers strikes accounted for the loss of 33,000 jobs. Meanwhile, the prior reading was revised lower from 336,000 to 297,000. The household employment survey indicated the unemployment rate (U3) rose from 3.8% to 3.9% as workers reported 348,000 fewer jobs, and the labor force participation rate dipped from 62.8% to 62.7%. Wages (average hourly earnings) eased to an increase of 4.1% year over year from 4.3%.

Despite the softening jobs data, the U.S. labor market remains in fairly good shape. According to the Atlanta Federal Jobs Calculator, the U.S. economy needs to add only 24,800 jobs per month through the rest of 2023 for the unemployment rate to remain at 4% or lower. 

Overall, the October U.S. jobs report provided markets exactly what they were looking for: evidence that the Federal Open Market Committee (FOMC) is done. Stocks and bonds continued their torrid rally to start November following the data release, while precious metals and energy bounced as well. The big loser of the day has been the U.S. dollar.

U.S. equity index futures were jolted higher around the jobs report, as U.S. Treasury yields dipped across the curve. The top performer was the Russell 2000 (/RTYZ3), which had already staged an impressive rally over the previous sessions as yields at the long-end of the curve came in. While both the S&P 500 (/ESZ3) and the Nasdaq 100 (/NQZ3) rallied as well, they remain burdened by the weaker Apple (AAPL) earnings report that was released yesterday after the bell.

After weeks of bear steepening, a bull flattener (yields falling across the curve, whereby long-end yields are falling faster than short-end yields) has started to make its way through the bond market. 30s (/ZBZ3) and ultras (/UBZ3) remained the most active bond futures contracts, each building on impressive gains seen between Wednesday and yesterday. Note that 10s (/ZNZ3) were not too far behind, as the 10-year yield dipped to 4.508%, its lowest level since Sept. 29. 

The post-NFP reaction in yields cleared the way for gold prices (/GCZ3) to move higher and threaten the October high at 2,019.7. Since the October lows, gold is up nearly 10%, aided by the view that the Federal Reserve was likely finished hiking rates, which just became a stronger view after this morning’s numbers. Traders will be watching positioning data due from the Commodity Futures Trading Commission (CFTC) today. Non-commercial gold longs rose last week to the highest level since July. 

Crude oil prices (/CLZ3) showed an upside reaction to the jobs data this morning as traders see the risk of further rate hikes dragging economic strength fade. Despite building on yesterday’s 2.5% gain, prices remain lower on the week. Meanwhile, traders continue to watch the Middle East, and intelligence suggests Hamas has grown increasingly frustrated with lack of support from Iranian proxy groups. 

A weaker dollar allowed euro dollar futures (/6EZ3) to move higher after a soft jobs report boosted the view that the Fed is finished hiking. Overnight index swaps added nearly 10 basis points to the chance for a cut in June. That, along with an enticing entry point for Treasuries, may keep a bid under the euro for now because we don’t have any major economic prints due out of Europe until Nov. 14, when updated GDP figures are due. 

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 

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.