Stocks Waver and Bonds Rise After Jobs Readings: Markets Wrap

(Bloomberg) — Stocks wavered and bonds rose as traders weighed mixed readings on the labor market for clues on the Federal Reserve’s next steps.
Just 24 hours ahead of the highly anticipated US payrolls report, data showed US companies added the fewest jobs since the start of 2021. Meanwhile, the weekly jobless claims figures came below estimates. Equities fluctuated in early New York trading. Treasury yields dropped across the curve, with traders pricing 110 basis points in Fed rate cuts in 2024.
This coming Friday, the August jobs report is expected to show payrolls in the world’s largest economy increased by about 165,000. While above the modest 114,000 gain in July, average payrolls growth over the most recent three months would ease to a little more than 150,000 — the smallest since the start of 2021.
“After today’s mixed numbers, it’s up to tomorrow’s jobs report to give investors a clearer read on the state of the labor market,” said Chris Larkin at E*Trade from Morgan Stanley. “We’re in a ‘good news is good, and bad news is bad’ environment, and markets are still trying to figure out if the economy is slowing too much, and whether the Fed is behind the curve.”
To Matt Maley at Miller Tabak, we could have another quiet day ahead of Friday’s jobs data.
“Given the impact last month’s employment report had on the markets, we wouldn’t blame investors at all for sitting on their hands for another day,” he said.
S&P 500 futures were little changed. Nvidia Corp. dropped after suffering its biggest two-day plunge since October 2022. As skepticism about the artificial intelligence trade mounts, traders are looking to results from Broadcom Inc. to see if they will be able to soothe Wall Street’s nerves. Tesla Inc. climbed on plans to launch the driver assistant in China and Europe. 
Treasury 10-year yields declined three basis points to 3.73%. The dollar was little changed.
To Stan Shipley at Evercore, the ADP private employment tally and other labor-market metrics suggest a “soft payroll” for August.
“We reduced our estimate for payroll employment to 150K in August, an unemployment rate should slip to 4.2% and a 0.3% gain in average hourly earnings,” he said.
While equities have stabilized for the moment, that doesn’t mean volatility won’t resume, according to Andrew Brenner at NatAlliance Securities.
“If the economy shows strength tomorrow in nonfarm payrolls, then equities should do better initially, but if rates get slaughtered, that won’t be good,” Brenner said. “If rates rally tomorrow because of a weak number, that won’t be good for equities either. A Fed of 50 would also have a negative context for equities.”
“So we are in a tails we lose, heads we lose,” he concluded.
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