The craziest non-agricultural day of the year is coming!

Reprinted from: Golden Ten Data The options market is betting that the U.S. stock market will fluctuate sharply after the release of the U.S. non-farm payrolls report on Friday.

Reprinted from: Golden Ten Data Options market betting. After the release of the U.S. non-farm payrolls report on Friday, the U.S. stock market will fluctuate significantly.
Traders expect the report to provide more clarity on how much the Fed may cut interest rates this year.
Stuart Kaiser, head of U.S. equity trading strategy at Citigroup, said that based on the cost of in-the-money put and call options expiring on Friday, the S&P 500 is expected to fluctuate 1.2% after the release of non-agricultural data.
He said the figure was the largest implied move ahead of a jobs report since March 2023, based on the S&P straddle\’s price at Wednesday\’s close.
Jeff Klingelhofer, co-head of investments at Thornburg Investment Management, said on the call: Everyone is focused on Friday\’s jobs report because the labor market determines the trajectory of inflation.
While that won\’t change the Fed\’s preference for a rate cut next if the labor market is significantly stronger, it means the possibility of lower borrowing costs later this year will ultimately be pushed back further.
Although the S&P 500 fell 4.2% in April, marking its worst monthly performance since September last year, U.S. stocks remain locked in a tight range.
The U.S. benchmark stock index has been remarkably quiet. Of the 84 trading days in 2024, there have been only 17 with moves of 1% or more. And there have been 300 trading days without a close of at least 2%. That\’s the first time since 2018 The longest one in years.
The VIX index, which reflects the 30-day implied volatility of the S&P 500 based on option values, has retreated after jumping to its highest level in more than five months in mid-April.
Federal Reserve Chairman Jerome Powell reiterated on Wednesday that more evidence is needed that inflation is cooling before cutting borrowing costs from two-decade highs.
He also stopped short of saying a rate cut was possible this year or that interest rates were at a peak, as he had previously said.
Friday\’s non-farm payrolls report is expected to show a slowdown in non-farm payrolls growth in April. But with the unemployment rate holding steady at a low level, growth remains strong.
It is estimated that employers hired 241,000 new workers last month after adding 303,000 workers in March. Average hourly wages may have increased by 0.3% from the previous month.
Before the release of the non-farm payrolls report on Friday, U.S. stocks and Treasury bonds climbed. The S&P 500 index exceeded 5,060 points. The Nasdaq 100 index rose 1.3%. The dollar suffered its largest decline since 2024.
Chris Larkin of Morgan Stanley E*Trade said: Although the Fed seems to have ruled out the possibility of raising interest rates, it has also made it clear that it is willing to maintain higher interest rates for a longer period of time.
Markets will be hungry for data that shows the economy isn\’t getting any hotter than it was in the first quarter.
A survey conducted by 22V Research showed that 30% of investors surveyed believed that Friday\’s non-farm payrolls report would trigger risk-on and 27% of investors expected to trigger risk-off. 43% of investors expect mixed/negligible results.
Among labor force indicators, investors are most concerned about average hourly earnings.
Oscar Munoz and Gennadiy Goldberg of TD Securities said: Because investors have become more hawkish than before, the market\’s reaction to weak data may still be greater than the reaction to strong data.
However, as expectations continue to be revised upward, the recent string of upward surprises in economic data is unlikely to last long.
Ryan Grabinski of Strategas Securities pointed out that after the Federal Reserve decided to stay on hold on Wednesday, the current interest rate pause reached 280 days. This is still the second-longest pause in history.
Grabinski said: A longer pause period would be constructive for U.S. stocks.
The longest pause period from June 2006 to September 2007 was associated with the stock market\’s best returns.
We\’ve reached a point where a rate cut by the Fed is more likely to mean the problem is getting worse.
At the same time, Bank of America\’s Savita Subramanian said that even if the Federal Reserve does not cut interest rates, a strong economy will maintain the bull market in U.S. stocks.
The bank\’s Subramanian said on Thursday: \”I think we\’re going to have a soft landing in a reasonable market environment. Growth going forward is probably going to be better than what we\’re used to. Interest rates are higher. Inflation is a little bit higher.\”
Investment experts are panicking due to uncertainty about the direction of geopolitics and interest rates, as well as the stock market\’s decline in April, and hedge funds are increasingly turning defensive.
Hedge funds added defensive stock positions to their portfolios in April at the fastest pace in eight months, while being net sellers of global stocks, data compiled by Goldman Sachs\’ prime brokerage unit showed.
This ended a four-month buying streak.
Healthcare stocks saw the largest inflows, according to Goldman Sachs. Consumer discretionary stocks saw the largest net selling in seven months.

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