August payrolls land with a Fed hike still a coin flip

Fed Governor Christopher Waller said Thursday he could support leaving rates alone this month, and the market took it as permission: all three major indexes closed more than 1% higher and the odds of a September hike fell from 63.2% to 50.4%. The August jobs report at 8:30 AM ET is the next input into a decision that is now, almost exactly, a coin flip.

What Waller actually said

Waller told Reuters he would be inclined to let the funds rate stand at 3.50%–3.75% if upcoming data confirm that price pressures are easing — and, in the same breath, that he would support a hike if inflation fails to cool. Markets priced the first half. CME FedWatch odds of a quarter-point hike at the September 16 FOMC meeting fell to 50.4% from 63.2% on Wednesday. The 10-year Treasury yield eased to around 4.75%, a day after reaching its highest level since November 2023.

The equity response was broad but top-heavy. The Dow rose 624.16 points, or 1.18%, to 53,686.11; the S&P 500 added 81.11 points, or 1.06%, to 7,747.71; the Nasdaq Composite gained 366.23 points, or 1.40%, to 26,584.06. Across the roughly 100 large caps in our feed, 72 closed higher, 27 lower and one unchanged.

But the breadth is thinner than that count suggests. IWM, the Russell 2000 proxy, rose only 0.40% against QQQ’s 1.19% and SPY’s 1.05%. A rate-relief rally that leaves small caps behind is a rally in duration-sensitive megacaps, not a vote of confidence in the economy underneath them.

The jobs number is only half the test

Consensus for August payrolls is about 56,000, with individual forecasts running from a 25,000 decline to a 121,000 gain — an unusually wide spread for a headline number. July lost 23,000 jobs. The unemployment rate is expected to hold at 4.1%. Average hourly earnings are seen rising 0.3% on the month, which would pull the annual rate to 3.0%, the softest wage growth since May 2021.

Here is where the data disagrees with the reflex. The instinct is that a weak payroll print is dovish, and in most cycles it is. But the case for a hike this month is an inflation case, not a labor-market one — Waller’s stated condition was about price pressures, not employment. A soft headline alongside 3.0% wage growth argues for a hold. A soft headline with wages running warmer than expected resolves nothing, and August CPI lands next week, still ahead of the FOMC. Today’s number can move the odds. It is unlikely to settle them.

One caveat on the print itself: August payrolls are routinely distorted by the timing of the school year, which is part of why the forecast range is so wide. Oxford Economics is at 95,000 and Pantheon Macroeconomics at 125,000, both far above consensus and both leaning on a rebound in government education hiring.

Software and crypto did the lifting

Snowflake (SNOW) closed at $356.47, up 16.55%, after reporting fiscal second-quarter revenue of $1.55 billion against the $1.48 billion consensus — up 35% year over year — and adjusted earnings of 62 cents a share against 45 cents expected. Product revenue of $1.49 billion grew 37%, a third straight quarter of acceleration, and the company raised full-year guidance to $6.07 billion.

The more interesting part is what happened after the open. The stock opened at $377.25, roughly 23% above Wednesday’s $305.84 close, and spent the session giving it back, finishing at $356.47 near the day’s low of $355.50. It printed $355.21 after hours on nearly 684,000 shares. A 16.5% gain that started as a 23% gap is a different message than a 16.5% gain that built through the day.

Robinhood (HOOD) rose 16.57% to $124.72 on 51.4 million shares, and the catalyst was analyst work on prediction markets rather than anything the company reported: Deutsche Bank argued that contracts on corporate financial KPIs will become the largest event-contract category, and Piper Sandler pointed to the NFL and NCAA football seasons as a near-term volume driver.

Crypto supplied the rest. Bitcoin reclaimed $81,000, up about 5%, on the same Waller-driven rate-pause read. Coinbase (COIN) gained 10.14% to $192.70. The miners and treasury vehicles moved further: in the movers feed, BitMine (BMNR) rose 14.61%, Cipher Mining (CIFR) 14.47%, Riot (RIOT) 13.47% and CleanSpark (CLSK) 11.04%.

Enterprise software went with it — Palantir (PLTR) +7.71%, ServiceNow (NOW) +6.49%, Oracle (ORCL) +5.69%, CrowdStrike (CRWD) +5.68%, Cloudflare (NET) +4.32% — which is close to a mirror image of Wednesday, when eight of the feed’s worst performers were software or security names. Tesla (TSLA) added 5.42% to $376.37 and Nvidia (NVDA) 1.80% to $228.45 on 133.9 million shares, the heaviest volume in the feed.

Broadcom beat and fell anyway

Broadcom (AVGO) closed at $357.16, down 2.74% on 60.1 million shares — the worst performer among the 100 large caps in our feed, on a day when 72 of them rose. It had reported fiscal third-quarter revenue of $29.59 billion against a $29.36 billion estimate and adjusted earnings of $3.32 a share against $3.24. The problem was the guide: fourth-quarter revenue of about $34.8 billion, short of the $35.03 billion consensus.

Worth noting how the day actually traded. Intraday the stock reached $342.33, 6.8% below Wednesday’s close, and finished roughly $15 off that low; it printed $356.55 after hours. Headlines written mid-session describing a 4%-plus decline captured the low, not the close. The pattern is the same one Palo Alto and MongoDB produced earlier this week: for companies levered to AI capex, a beat that is merely in line with the size of the expectation is not a beat at all.

Where the market opens from

Brent crude is trading near $96 a barrel this morning and is on track for its steepest weekly gain since mid-July, on Middle East tensions. Energy equities again declined to care: XLE fell 0.74% on Thursday and Exxon Mobil (XOM) 1.18% to $162.21, the second-worst name in the feed. This is the third session of the same divergence, and it is now the cleanest disagreement in the market. Energy shares are priced for a supply scare that resolves; the bond market — with the 10-year at 4.75% after touching multi-year highs and a hike still a 50-50 proposition — is priced for an inflation impulse that does not. Today’s wage figure speaks directly to the second of those.

S&P 500 futures were up about 0.06% near 7,760 during European hours, with Nasdaq 100 futures up 0.38% near 29,640 — little changed, which is what a market waiting on an 8:30 release looks like.

Europe is flat and waiting too. The STOXX 600 slipped 0.1% to 648.67, the DAX rose 0.1%, the FTSE 100 fell 0.1% and the CAC 40 fell 0.2%. The standout is Volkswagen, up 6% after its supervisory board reached a turnaround agreement with unions and the state of Lower Saxony that includes 50,000 job cuts; the European autos index gained 1.1% on it.

Thursday’s after-hours prints on the big movers were quiet: Nvidia $229.70, Broadcom $356.55, Tesla $374.90, Robinhood $124.00, Coinbase $191.67. Snowflake at $355.21 was the only one to trade meaningful size.

What to watch today

8:30 AM ET — August employment report. Consensus near 56,000 payrolls against -23,000 in July, unemployment 4.1%, average hourly earnings +0.3% month over month and +3.0% year over year.
The wage line, not the headline. Waller’s condition for holding was easing price pressures; average hourly earnings is the part of this release that speaks to it.
The 10-year yield at 4.75%. It fell on Waller’s comments from its highest level since November 2023. Where it settles after 8:30 is the fastest read on how the market scored the print.
CME FedWatch odds into the September 16 FOMC. They stood at 50.4% for a quarter-point hike as of Thursday, down from 63.2% Wednesday.
Brent near $96, heading for its steepest weekly gain since mid-July, against energy equities that fell on Thursday.
No major US earnings are scheduled before the open. Thursday’s reporters are still settling: Ciena fell 10.90% and Victoria’s Secret 13.28% in the movers feed.
US markets are closed Monday, September 7, for Labor Day. Today is the last session before a three-day weekend.

Not financial advice. iTrading Buddy summarizes publicly available market data and news; every figure above is sourced from the reporting available before the US open on the date shown. Verify anything you act on.