Good take on NFP #'s out soon...
See what actually happens....
Economists expect 258,000 jobs were added, down from 372,000 in June, according to Dow Jones. Unemployment is expected to hold at 3.6% and wages are expected to rise by 0.3%. The jobs report is released Friday at 8:30 a.m. ET.
Heading into tomorrow's main event - the nonfarm payrolls print (which is the appetizer for CPI next Wednesday), JPMorgan's trading desk asked a rhetorical question: what's better for markets: 50K or 400K jobs for NFP?
It answered as follows: "50K NFP gets the Fed closer to “Mission Accomplished” as they are nearly there with housing markets (lower prices pending). I think a 400k print would have bond yields reprice higher, potentially taking the 10Y yield above 3% which has acted as a resistance point for Equities, recently."
In other words, good news is bad, and bad news is great news, precisely as we said would be the norm moments after last week's Powell presser in which he said that forward guidance is now dead and instead the Fed is data dependent.
Goldman agrees, and flow trader John Flood writes in his EOD wrap that "we are firmly in a BAD is GOOD and vice versa tape right now." He adds that whereas Goldman estimates a +225k headline print (vs +372 prior and +250k consensus). In this context:
The market "will get hit hard (-200bps) on a print north of 372k (>prior reading) as sooner than expected “fed pivot” convos will quickly be shelved."
On the other hand, "a relatively inline print (150k – 300k) mkt wont react to as traders will sit on hands and wait for CPI."
Finally, "if jobs are lost and we get a negative print, tape will rally 100+bps as FOMO/COVER chase will (remain) on w/ early 2023 rate cut discussions gaining more momentum."
