Drop in Job Openings Fuels Rate Cut Bets – US Market Wrap

Treasury yields fell as data indicating a further slowdown in the US labor market boosted Wall Street’s bets on Federal Reserve rate cuts. Stocks gave up earlier gains as Nvidia fell.

Just a few days before the payrolls report, JOLTS, a measure of job openings, fell short of expectations and reached its lowest level since 2021. The figures sparked an immediate reaction in the bond market, sending the yield on the US two-year note briefly below that of the ten-year note as traders bet on a massive rate cut this month.

With the Fed set to begin cutting interest rates in a few weeks, the main question now is how much the first reduction will be. The answer will most likely be determined by monthly US employment data, which are due on Friday.

Investors are on edge after last month’s jobs report sparked growth concerns. Jerome Powell has made it clear that the Fed is now more concerned with labor market risks than inflation, and another bad report would strengthen the case for a significant rate cut.

Treasury 10-year yields fell seven basis points, to 3.76%. Swap traders have fully priced in a quarter-point rate cut in September, with a more than 30% chance of a half-point cut. Over 100 basis points of easing are expected during the remaining three meetings this year.

The S&P 500 index fell 0.2%. Nvidia experienced its worst two-day decline since October 2022. Verizon Communications is said to be in advanced talks to buy Frontier Communications, and Joe Biden is said to be preparing to block Nippon Steel’s acquisition of United States Steel.