On Friday at 8:30 a.m. ET, the eagerly awaited September jobs report will be released by the Bureau of Labor Statistics. Investors will closely analyze the non-farm payrolls (NFPs), which provide insight into the monthly rate of new job creation. This data, along with inflation, significantly influences the Federal Reserve’s decision-making on interest rates.
Investors are expecting a decline in NFPs from August’s 187,000 to 170,000 in September. This figure would indicate a slowdown compared to the average of 194,000 new job additions over the past six months and 257,000 over the past year.
Aside from NFPs, investors will pay close attention to the unemployment rate, which is anticipated to decrease from 3.8% to 3.7%, and the year-on-year increase in hourly wages, expected to stay at 4.3%.
The jobs report has a profound impact on the markets. If NFPs exceed expectations and hourly wages show stability or a higher-than-expected increase, concerns about further interest rate hikes may arise. Conversely, a significant cooling in the labor market could lead to the expectation that the Federal Reserve will maintain its current stance.
Currently, market-implied probabilities suggest an 80% chance of the Federal Reserve keeping interest rates unchanged at the Nov. 1 meeting, according to CME Group Inc.’s FedWatch Tool.
Following the release of the September NFPs data, five ETFs could experience significant volatility:
1. Invesco DB USD Index Bullish Fund (UUP): The dollar is highly sensitive to jobs data. A stronger-than-expected employment growth is positive for the dollar, as it confirms the Federal Reserve’s commitment to higher interest rates. Conversely, a weak jobs report suggests no further rate hikes.
2. iShares 20+ Year Treasury Bond (TLT): TLT is closely watched due to its volatility in response to Treasury yields. If NFPs exceed expectations, it could push yields higher and negatively impact TLT.
3. Invesco QQQ Trust Series 1 (QQQ): Technology stocks are sensitive to rate expectations. Rising Treasury yields have negatively affected the Nasdaq 100, so QQQ bulls hope for a weaker-than-expected NFPs report.
4. Invesco Solar ETF (TAN): The solar sector has experienced a significant decline due to a stagnant real estate market and rising Treasury yields. A softer-than-expected jobs report would benefit the solar industry.
5. VanEck Gold Miners ETF (GDX): Rising Treasury yields have also impacted gold miners. If NFPs fall short of expectations, gold could benefit, potentially leading to a decline in yields.
Overall, the jobs report plays a crucial role in influencing market dynamics and various sectors.