August Jobs Report: What It Means for the Fed and Markets

Welcome back to Market Movers, the opening bell.

Well, let's get to the big story breakdown.

The August jobs report is in and Wall Street is digesting the latest data.

And this is as the Fed Reserve prepares for its September policy meeting.

Now, yesterday, VP J.D.

Vance publicly pressing for lower interest rates to help housing affordability.

Meanwhile, Fed officials deeply divided between Chairman Bush's hawkish rate hike warnings as well as Governor Waller's preference to hold borrowing costs steady, at least for now, ahead of inflation figures.

Meanwhile, this morning, as we digest the latest jobs report, we are looking at what's happening across all asset classes.

And joining us this morning is Eric Criscuolo, market strategist at the New York Stock Exchange.

Good morning, Eric.

Morning, Remy.

Thank you so much for joining me.

Always happy.

Always happy to be here.

Well, we got that jobs report and of course now that we saw the unemployment rate unchanged and nonfarm payrolls coming in better than expected, many of us are looking ahead to that long holiday weekend, especially following everything that's happened this week, especially Fed rate expectations.

So right now we are looking at that division in terms of rate hike expectations climbing slightly higher.

But your interpretation of the data?

Yeah, it was a very hot print as far as the labor goes, as far as the labor data goes.

Hot meaning that, you know, much higher than consensus.

I think it basically tripled what consensus was expecting.

The previous reports, the past couple of months, have been relatively mild, if not, you know, sluggish.

Not necessarily a bad thing, but just kind of highlighting that the labor market has been in this kind of equilibrium.

Not too many jobs being added, not too many jobs being lost.

We've talked about the low hire, low fire environment for a while.

This was a pretty hot print, but also The prior months got revised higher as well.

So we had a negative print last month, but that got revised into a positive print in this report.

So the labor market shows absolutely no signs of kind of slowing down, of cracking, anything like that.

And you've kind of heard that with how the Fed officials have spoken about it.

They have not said that they are concerned about the labor market. at all.

They have been saying that the economy is resilient.

They have been very focused on inflation, inflation, inflation.

Yesterday, Kevin Waller, when he was speaking, his thoughts were that the CPI data, the inflation data that's coming up, those prints will decide how he votes at the next meeting in September.

He didn't say anything about this employment print, whether it was coming in hot or cold or whatever.

So it kind of shows you where the Fed is thinking.

Yeah, it was really interesting to see that market reaction following Fed Governor Chris Waller's talk yesterday.

I know there is Walsh as well as Waller, so many of us, you know, after a long day, we start getting confused.

But following those comments from Waller, we saw that Fed rate expectations did become a coin toss, right, a 50-50 division. inflation.

So here we are, we're looking at oil prices elevated yet once again around 90 a barrel for WTI, but diesel hitting an all-time high as well.

So that has an impact on inflation and of course we're waiting for PPI, CPI next week.

So what does all of this mean when it comes to Americans, the economy, as well as rates?

Yeah, it's kind of we've been in this story for a while now where price pressures, inflation have been here since basically we've since we came out of COVID.

Just supply shock after supply shock after supply shock, added on to the incredible amount of money printing that happened to get us out of the COVID or to see us through COVID.

It's just been one hit after the other as far as inflation goes as far as the average consumer, you know, spending, seeing their paycheck become a smaller and smaller take home because they're spending more and more on, you know, basic necessities.

You know, fuel, food, energy, those come out of the core CPI, you know, calculation.

Unfortunately, though, that makes up a huge part of average consumers' spending on a monthly basis.

So the consumer has been hit with a lot of inflation pressures, but With all this data, though, you're seeing that the consumer has held up rather well.

Spending has continued to increase overall, and you're not seeing those really big cracks manifesting themselves.

Companies continue to print very strong earnings.

Now, there's a question of are the earnings coming at the expense of the average worker, their take-home pay, their hourly pay, et cetera.

That could be something that is developing.

We'll see if corporate margins continue to move higher, if they stabilize or if they start to come down, because just overall the inflation environment is just a little too hot to handle right now.

Yeah.

And a lot of moving parts here, Eric.

But I do want to get your perspective on what we're seeing in the bond market in particular and yield.

So here we are after the jobs report.

We saw the 10-year yield spike yet once again to that 4.8 percent level.

So what are the risks moving forward with yields so elevated?

Yeah, so, interesting that yields spiked initially, especially the two-year spiked initially on the jobs report.

But it's kind of come in, when I sat here, it started to come in a little bit.

So, basically just erasing the past two days, though, of the move lower.

Again, we're kind of repricing.

Is it a 60-70% chance of a hike?

Is it a 50-40% chance of a hike?

It's basically a coin flip, and we are talking about 25 basis points in the end.

Probably, if I had to put my chip in one area or the other, probably they hold rates.

Certainly not saying that they will, but that's where I would lean.

We'll see what the CPI comes in next week.

Yields are high, they're elevated, but versus historical standards, they're not that high.

Everyone is kind of looking at the long end, because when the 10-year and the 30-year start to move, violently, that's when something is really wrong in the market.

And that's when you're seeing global yields move higher as well.

It's not just the US.

Japan has been the poster child.

They're seeing rates they haven't seen in 30, 40 years.

So it's just this kind of reconfiguration of how these big macro global trades kind of have taken place.

Everyone could rely on Japanese yields being very low.

It was a big yen carry trade. for so long, so that's going to cause, when those yields move, that's going to cause a lot of flows to kind of have to reset, change, a lot of things that have been established over the past 10, 15 years, that's kind of having to get rejiggered, causing some volatility across markets, across assets, not just in U.S. equities, but just around the world.

Yeah, and you mentioned what's happening in the FX markets, and that is something we're paying attention to, especially when it comes to the Japanese yen, the BOJ's next moves.

But here on Wall Street, we're paying attention to what's happening across the sectors.

And as we stand right here, right now, we are looking at energy as well as IT outperforming the S&P 500, given everything that's happened this year.

As we head into the rest of 2026, what are you keeping in mind when it comes to sector as well as factors?

Yeah, it's been known for a while that September is generally the weakest month of the year for stocks.

We're in September right now.

I believe the past two Septembers, though, we've actually been higher, so it doesn't always go according to plan.

But generally, a weak time of the year.

I guess the question is, will tech continue to lead?

Will it continue to see these strong gains with AI?

And energy is obviously trading off of oil.

If oil stays elevated, energy's still going to probably work.

But if oil moves lower, if we have some resolution in the straight, that sector's probably going to come down meaningfully.

We'll see.

But it's basically also, what are the other sectors going to do?

We have seen over the year that we can get these strong rotations out of tech and into other areas of the market to kind of at least keep things stabilized on the headline S&P 500.

So, you know, tech sold off in July pretty harshly, you know, and the markets pulled back.

But other sectors kind of saw, got a bid.

We've seen financials work every now and then.

We've seen healthcare rally pretty strongly off of its lows.

So these are big sectors, not as big as tech, but big sectors that can kind of take in those flows if people want to move out of tech for whatever reason and into other areas.

There are pockets available.

There's also, what I'm watching is the the discrepancy between consumer discretionary, consumer staples.

We saw a couple of consumer names, staples names, get hit hard yesterday, some food names, on some supply issues, on some margin pressure.

So it's not, even if it's a defensive name, sometimes it's not really a defensive name.

So you really just gotta be nimble.

But definitely looking to see if we see those strong rotations throughout or in intra-rotation between the sectors of the economy.

Well, Eric, thank you so much for joining us on this Friday morning ahead of a holiday weekend.

A lot to digest and ponder as we head into the rest of September.

So thank you so much for joining us anytime.