Stock Market Rallies on Rate Cut Hopes Amid Jobs Market Weakness

SPY and QQQ ETFs climbed as markets priced in growing probability of a 50bps Fed rate cut in September. The CME FedWatch tool now shows an 11.8% chance of aggressive easing, up from zero in early September.

Labor market indicators flashed warning signals, with the NY Fed's job-finding probability metric hitting a decade low at 44.9%. The Conference Board's Employment Trends Index slid to 2021 levels, with 20% of respondents reporting jobs are 'hard to get' - the highest since the pandemic recovery began.

Market participants appear to be betting that softening employment data will force the Fed's hand. Lower rates typically stimulate corporate borrowing and hiring, though some analysts question whether monetary policy can offset structural labor market shifts.