Stocks and Bonds Rise as Weak Jobs Fuel Fed Bets: Markets Wrap

(Bloomberg) — Wall Street traders kept piling into bets the Federal Reserve will cut rates in September as weak labor data lifted bonds. Those wagers also propped up stocks, which halted a two-day rout amid a rally in big tech.

Just 48 hours ahead of the all-important US payrolls report, a drop in job openings to the lowest in 10 months saw traders almost fully pricing in a Fed cut this month and projecting at least two reductions in 2025. Treasuries bounced after a slide that put the 30-year yield close to 5%. The dollar fell.

Subscribe to the Stock Movers Podcast on Apple, Spotify and other Podcast Platforms.

While most S&P 500 shares actually slipped, Alphabet Inc. hit a record high as Google dodged a sale of Chrome. Apple Inc. plans to launch an AI-powered web search tool for Siri. In late hours, Salesforce Inc. forecast lackluster sales growth.

The drop in vacancies indicates companies are becoming more cautious and selective with their hiring as they attempt to gauge the impact of tariffs on the economy. In addition to the openings data, the pace of hiring has slowed and it is taking longer for unemployed people to find another position.

“This data point does confirm the slowing pace of hirings being seen in a variety of stats in the aggregate, but something we’re well aware of — and why the Fed is cutting rates by 25 basis points in two weeks,” said Peter Boockvar at The Boock Report.

Before that, Friday’s jobs data will be a crucial input for Fed officials. Some are less concerned about the slowdown in payrolls growth because it’s being accompanied by a decline in the participation rate. They’re also wary of reducing borrowing costs when inflation is gradually increasing.

Others, like Governor Christopher Waller say the central bank should begin lowering rates in September and make multiple cuts in coming months, adding that officials could debate the precise pace of reductions. He spoke on CNBC.

Read: Fed’s Beige Book Shows Little or No Growth Across Most of the US

At Bankrate, Mark Hamrick says the broader labor trend aligns with what he’s been calling a “no fire, no hire” job market. That means, many employers are reluctant to cut jobs, but also cautious about bringing on new workers.

To Krishna Guha at Evercore, the soft job-openings report hardens the already high likelihood of a September Fed cut, making it still more difficult for Friday’s jobs report to derail the move.

“As softening in labor demand has not been accompanied by a rise in layoffs or a pullback in spending, investors and policymakers should be wary of interpreting payrolls softness as an imminent recessionary signal,” said Seema Shah at Principal Asset Management.

The so-called JOLTS report may not be “flashing alarm bells”, but it’s the latest data point that reiterates a soft jobs market in the US, according to Bret Kenwell at eToro.

While the US economy may have the cushion to absorb a softer jobs market, investors want to be careful not to see it develop into a really weak labor market, he said.

“Today’s report is the latest data point that helps tip the Fed’s scale toward a rate cut,” he said. “But in the long-term, investors should not cheer for notable labor-market weakness for the sole benefit of lower rates.”

Read: US Wage Growth for Job Stayers Exceeds Switchers for Sixth Month

Economists project about 75,000 jobs were added in August, based on the median of a Bloomberg survey, while the jobless rate is seen at 4.3%. Four straight months of sub-100,000 payrolls growth would mark the weakest such stretch since the onset of the pandemic in 2020.

“A large downside surprise in labor market data could push rates sharply lower given the concern around the Fed’s labor mandate,” said TD Securities strategists including Oscar Munoz and Gennadiy Goldberg. “We remain biased long on dips and expect rates to move lower throughout the year.”

They also said “risk-reward feels more balanced” heading into Friday’s payrolls.

‘Bar Is High’

“The bar is high to price out September and alternatively, a sharp tick higher in the unemployment rate is needed to price in some odds of a 50 basis-point cut and for it to weigh significantly on the dollar,” the TD strategists said.

Meantime, US rate strategists at Bank of America Corp. made trade recommendations based on the possibility that the Fed will ease policy prematurely.

“The market is likely to price a dovish Fed that over-weights softening employment vs inflation, which our US economists see as a policy mistake,” and “ongoing challenges to Fed independence also influence our core rates views,” BofA strategists including Mark Cabana and Meghan Swiber said.

“A Fed that may be biased to cut rates more aggressively near-term vs what we see justified by fundamentals creates scope for higher inflation risk and potential future hikes,” they wrote.

The Fed has kept rates unchanged in 2025, largely due to concerns tariffs could stoke inflation. But lackluster employment figures have prompted greater concern, and Fed Chair Jerome Powell recently signaled a cut could be warranted amid a “shifting balance of risks.”

Read: US INSIGHT: Will Nonfarm Payrolls Defy ‘August Anomaly’? Maybe

Powell’s recent Jackson Hole speech showed us the Fed’s reaction function is more dovish than we thought, according to Lauren Goodwin at New York Life Investments. Absent a meaningful upside surprise in the jobs report this week, the Fed will cut 25 basis points in September — which is a “constructive backdrop for risk assets,” she said.

“But at this juncture, we’re still doubtful a September cut points to a prolonged interest rate cutting cycle,” Goodwin noted. “Risks to inflation are real and coming from many angles (tariffs, corporate margin protection, a sharp falloff in labor market supply). What’s more, financial conditions are very loose, making it difficult to justify a rapid rate-cutting cycle in our view.”

In the aftermath of the Fed’s Jackson Hole symposium, BofA clients shelled out roughly $1.5 billion for small-cap stocks, the second-largest allocation in the firm’s data history going back to 2008.

The clients were big net buyers of US equities in week ended Aug. 29, with inflows of $2.3 billion into single stocks and $2.1 billion into exchange-traded funds, strategists led by Jill Carey Hall said.

Stocks bounced Wednesday after having started September on a sour note amid lofty technology valuations and concerns about global fiscal outlooks.

“September began with a predictable wave of volatility, with tariff uncertainty and rumors driving behavior in a vacuum of tangible data,” said Mark Hackett at Nationwide. “Following the tremendous rally since April and given the elevated valuations/expectations and rumbling of macro concern, a period of consolidation is not unexpected or unhealthy.”

‘Dip Buying’

Investors should buy the dip in stocks as global growth is holding up better than expected and the Fed is likely to cut rates going forward, Barclays Plc strategists led by Emmanuel Cau said. While positioning is higher, ample dry powder remains on the sidelines, they noted.

“If anything, add on weakness,” said Steve Chiavarone at Federated Hermes. “If you cut away the noise and volatility, I’m not going to bet against the US market in an environment where earnings are growing, estimates are accelerating, economic data is good and rates are going to come down.”

Meantime, HSBC strategists increased their year-end target for the S&P 500 for the second time in a month, citing a boost from better-than-expected quarterly earnings. Nicole Inui now expects the benchmark to end the year at 6,500 points. The gauge closed Wednesday at 6,448.26.

“We believe that as long as cracks don’t begin to form within AI spending expectations, stocks will continue to grind higher after the seasonally weaker September period,” said Chris Senyek at Wolfe Research. “However, these lofty expectations can cut both ways as we see AI spending expectations as a key risk for 2026.”

Read: Oil Drops on Report OPEC+ Will Consider Fresh Production Boost

Corporate Highlights:

Alphabet Inc.’s Google avoided a breakup after a US judge ruled against the government’s most onerous proposals, including a forced sale of its Chrome browser. While it’s barred from exclusivity deals, Google will still be allowed to pay its partners — a key win for Apple Inc., which has received roughly $20 billion a year for making Google search the default on iPhones. Apple Inc. is planning to launch its own artificial intelligence-powered web search tool next year, stepping up competition with OpenAI and Perplexity AI Inc. Salesforce Inc. projected lackluster quarterly sales growth, fueling Wall Street’s fears that the software giant is losing out to competition from emerging artificial intelligence companies. Hewlett Packard Enterprise Co. gave a disappointing earnings forecast for the current period, renewing concerns about tightening margins in the server computer industry. American Eagle Outfitters Inc. posted higher-than-expected quarterly sales, weeks after the jeans-maker found itself embroiled in a social media firestorm over its controversial Sydney Sweeney ad campaign. Macy’s Inc. raised its annual outlook and reported its best comparable sales growth in three years, the latest signs that consumers are still spending despite concerns about inflation and tariffs. Pfizer Inc. defended the research supporting its Covid vaccine in statement on its website, in a direct response to a social media post by President Donald Trump over the weekend questioning whether drug companies were withholding information about the shots. ConocoPhillips, the largest independent US oil producer, plans to cut as much as a quarter of its global workforce amid lower crude prices and expectations of peaking shale output. WestJet, Canada’s second-largest airline, will purchase 67 Boeing Co. aircraft with an option for more, placing its biggest-ever order in a push for future growth even as trade tensions with the US persist. Tyson Foods Inc. said its supply chain chief left the company after violating internal rules, marking the second senior executive departure for improper behavior in just over a year. Warner Bros. Discovery Inc., which is splitting itself in two, could sell a 20% stake in its studio and streaming business before the planned separation next year. Dollar Tree Inc. said that profit for the current quarter would be little changed as the lift from price hikes to offset tariffs wanes. Campbell’s Co.’s earnings beat estimates as Milano cookies helped its snacks business outperform. ServiceNow Inc. is offering federal agencies discounts of as much as 70% on its software, a move aimed at spurring adoption as the Trump administration presses for faster government implementation of artificial intelligence tools. The Trump administration is moving to block the development of more offshore wind projects, the latest in a series of high-profile setbacks for an industry that’s caught the president’s ire. French artificial intelligence startup Mistral AI is finalizing a €2 billion investment that values the company at €12 billion ($14 billion), including the new funding — solidifying its position as one of Europe’s most valuable tech startups. Michael Novogratz’s Galaxy Digital Inc. is offering a version of its Nasdaq-listed shares that can be traded on the Solana blockchain, aiming to spur similar tokenization efforts. A year after losing its spot in Britain’s blue-chip benchmark, Burberry Group Plc is returning to the UK’s stock-market elite. Unilever Plc Chief Executive Officer Fernando Fernandez expects to replace a quarter of the group’s top 200 managers following a performance review, as he leads an overhaul of the maker of Dove soap. “History has ample evidence that bonds will regain favor during times of economic turmoil. Also, risk premiums look more subdued now than back in July and May of this year, when long-dated yields broke above 5%. And a September rate-cut is nearly locked in too. These conditions will cap how much higher yields can go.” — Tatiana Darie, Macro Strategist, Markets Live.

For the full analysis, click here.

Some of the main moves in markets:

Stocks

The S&P 500 rose 0.5% as of 4 p.m. New York time The Nasdaq 100 rose 0.8% The Dow Jones Industrial Average was little changed The MSCI World Index rose 0.4% Bloomberg Magnificent 7 Total Return Index rose 2.2% The Russell 2000 Index was little changed Currencies

The Bloomberg Dollar Spot Index fell 0.1% The euro rose 0.2% to $1.1658 The British pound rose 0.3% to $1.3439 The Japanese yen rose 0.1% to 148.14 per dollar Cryptocurrencies

Bitcoin rose 0.7% to $112,223.79 Ether rose 3.8% to $4,480.16 Bonds

The yield on 10-year Treasuries declined four basis points to 4.22% Germany’s 10-year yield declined five basis points to 2.74% Britain’s 10-year yield declined five basis points to 4.75% The yield on 2-year Treasuries declined two basis points to 3.62% The yield on 30-year Treasuries declined six basis points to 4.90% Commodities

West Texas Intermediate crude fell 2.5% to $63.93 a barrel Spot gold rose 0.9% to $3,564.24 an ounce ©2025 Bloomberg L.P.