The stock market’s comeback faces its first major test this week with the release of January’s jobs report, and JPMorgan’s trading desk has illustrated some scenarios on how the data could affect the rebound. The major averages have managed to bounce back enormously from last week’s tech rout, with the Dow Jones Industrial Average on a record-breaking tear, but they’re going to need to skirt any pitfalls around the nonfarm payrolls report to continue their advance. JPMorgan U.S. Market Intelligence outlined what could happen directly after the report. More than 110,000 jobs added, 5% chance: The S & P 500 could fall 0.5% to 1% Between 90,000 and 110,000 jobs are added, 20% chance: The S & P 500 may see a gain of 0.25% to 1% Between 60,000 and 90,000 jobs are added, 40% chance: The S & P 500 could rise 0.25% to 0.75% Between 30,000 and 60,000 jobs are added, 30% chance: The S & P 500 could fluctuate between a decline of 0.25% and an advance of 0.5% Fewer than 30,000 jobs are added, 5% chance: The S & P 500 may see a slide of 0.5% to 1.25% The most likely scenario is that the U.S. economy added somewhere between 60,000 to 90,000 jobs in January, an outcome that could result in a gain of 0.25% to 0.75% in the S & P 500, according to the trading desk. .SPX 5D mountain The S & P 500 in the past five trading days “We think the print falls in the Goldilocks zone but one that is too hot will trigger a repricing of the yield curve higher and the elevated bond vol likely produces a down for stocks and one that is too cool will have the market on edge that the Fed is late to resuming its easing cycle and with Powell unlikely to cut before his term as Fed Chair ends, means that first cut would be in June,” read the report. Indeed, the Wall Street firm’s chief U.S. economist Michael Feroli forecasts 75,000 jobs added to the U.S. economy in January, better than the 50,000 jobs added in the prior month. He expects the unemployment rate held steady at 4.4%. The labor market has increasingly worried investors in recent days given mounting evidence of weakness. The recent ADP data showed private hiring was nearly flat . Job openings plunged to a level not seen since September 2020 . Layoffs at U.S. employers hit their highest January total going back to 2009, according to data from outplacement firm Challenger, Gray & Christmas. One reason why some investors remain unconcerned is that the breakeven point for nonfarm payrolls is lower, given slower labor force growth in part because of changes to immigration. “On labor markets, the market appears to be slow to digest that the break even NFP is significantly lower today than it was during much of this post-COVID era (~30k today vs. ~250k in 2023),” read the JPMorgan trading desk’s note. There are two unlikely scenarios. A nonfarm payrolls coming in above 110,000 could mean a drop of 0.5% to 1% in the S & P 500. A report that comes in below 30,000 would similarly mean a drop of 0.5% to 1.25% in the broader index. The trading desk said it’s “tactically bullish” on the stock market, though it expects the rotation and broadening theme will continue. The options market itself is pricing in its own odds of a roughly 1.2% move on Feb. 11, as of Friday’s close.
The stock market needs a Goldilocks jobs report Wednesday. Here are the scenarios
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