Wall Street Rallies on AI Buzz, but All Eyes Turn to Critical Jobs Report

Quick Take:

• Consensus forecast: ~110k–115k jobs added

• Unemployment rate: Expected to tick up to 4.2% from 4.1%

• Average Hourly Earnings (AHE): Forecast at 0.2% MoM / 3.7% YoY

• FedWatch: 97% chance of no hike tomorrow; 62% chance of a cut in September, both at risk of repricing
  

Why This Print Matters:

• Private hiring is faltering: Just 74k jobs last month, continued softness here signals real labor market cooling

• Manufacturing jobs declining: -7k in June, down three straight months

• Claims diverge: Initial jobless claims fall (224k), but continuing claims are elevated (1.96M), suggesting slower re-hiring

• Wages are the wild card: AHE near 3.5% supports Fed "patience" narrative but any upside surprise could revive hawkish bets

• Possible scenarios:
  

Current Macro Backdrop:

• July was volatile: The Dollar Index (DXY) rebounded sharply from 96.40 lows to 100.12, driven by stronger Core PCE data (0.3% MoM vs. 0.2% est.)

• AI stocks power equities: Meta +11%, Microsoft +4.4%, Nasdaq eyes a new all-time high

• Seasonal NFP trends: August prints average ~160k (ex-COVID years), but recent data points to downside risks

• DXY at key inflection: A break above 100.00–100.50 could accelerate USD rebound; failure could lead to renewed selling
  

Positioning Risks into the Print:

• Equities are stretched, near ATHs being vulnerable to any wage upside or hawkish repricing

• FX Majors have pulled back from July highs, USD new trend hinges on NFP

• Gold and bonds at risk in hot print; yields and rate expectations still highly reactive
  

Bottom Line:

This NFP is about confirmation or contradiction of a slow-cooling labor market. Private hiring and wage dynamics will be decisive in shaping the Fed’s September decision and the USD’s trajectory into August