SPY & QQQ Soar on Rate Cut Hopes as Jobs Market Flashes Fresh Warning Signs

Wall Street's favorite ETFs catch fire as traders bet on Fed pivot

The Jobs Mirage

Beneath the surface rally, employment data keeps throwing curveballs—another 'transitory' problem, surely. Markets shrugged off the red flags like they were mere speed bumps on the road to easy money.

Powell's Put in Play

Rate cut optimism isn't just hope—it's the jet fuel behind this rally. Traders are pricing in dovish turns faster than you can say 'soft landing.' Because nothing says healthy economy like needing constant central bank life support.

The Real Story

While traditional markets play monetary policy lottery, smart money's already rotated into assets that don't beg for Fed favors. But hey—at least the bulls get one more narrative to ride before reality checks back in.

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A rate cut can boost the jobs market by lowering the cost to borrow for companies, stimulating investment, growth, and hiring in the process. Recent data points have suggested that the labor market could be weakening, adding fuel for the Fed to cut rates.

The New York Fed’s August Survey of Consumer Expectations showed that respondents had a perceived probability of 44.9% of being able to find a job if losing their current one, the lowest rate since the survey was created in 2013. Additionally, the Conference Board Employment Trends Index (ETI) fell to 106.41 in August, reaching its lowest level since 2021. Respondents who believe that “jobs are hard to get” touched 20%, marking the highest rate since 2021.

“While the labor market remained resilient over much of this year, six of eight ETI components were negative in both July and August for the first time since November 2024,” said Mitchell Barns, an economist at The Conference Board. “This potentially marks a turning point, where business activity is slowing more materially to reflect softer business confidence levels.”

The survey data comes after Friday’s nonfarm payrolls showed 22,000 new jobs in August, well below the expectation of 75,000. Making matters worse, the Bureau of Labor Statistics revised June’s nonfarm payrolls lower by 27,000 jobs, resulting in 13,000 lost jobs for the month and ending a 53-month streak of gains.

Moody’s chief economist Mark Zandi is sounding the warning bell, saying that the U.S. has already entered into a “jobs recession.” Additionally, Zandi believes that states accounting for roughly a third of U.S. GDP are already in, or close to, a recession.

“It’s not a full-blown recession, as GDP, incomes, and profits are still slowly growing,” Zandi said. “But for how much longer, if the economy continues losing jobs?”

The concerning jobs data and rising odds of a 50 bps reduction have resulted in the 10-year Treasury yield sinking to its lowest level since April. The 30-year fixed rate mortgage rate, which is closely tied to the 10-year yield, has fallen as well and is now at an 11-month low.

The S&P 500 (SPX) closed with a 0.21% gain while the Nasdaq 100 (NDX) returned 0.46%.