On the Eve of Nonfarm Payrolls, How Will Employment Data Affect Stock Market Trends and Rate Cut Expectations?

TradingKey - The U.S. Bureau of Labor Statistics will release the February non-farm payroll (NFP) data at 8:30 AM ET on March 6. This release comes as the market is oscillating between Middle East geopolitical conflicts and the "AI disruption" narrative, causing investors to remain cautious.

Despite precious metals, which are traditionally known for their safe-haven status (such as Gold (XAUUSD) and Silver (XAGUSD) ), seeing somewhat weak price action, the market is more inclined to chase U.S. dollar liquidity, pushing up demand for the greenback and leading to a significant overall rise in the U.S. Dollar Index.

JPMorgan Chase (JPM) believes that while oil prices have recently climbed and overall market volatility has intensified, this sentiment has not yet been fully factored into expectations for the NFP data.

The impact of this NFP data may be diluted. If the data is weak, it would increase rate cut expectations, but the short-term risk would be stagflation; in the long run, this presents significant headwinds for the healthy development of the market.

According to JPMorgan's market analysis, the U.S. stock market is expected to see these five scenario reactions following the release of tonight's NFP data:

• NFP above 105,000: The probability of this scenario is 5%, and the S&P 500 would rise by 0.5%–1.25% as a result.

• NFP between 75,000 and 100,000: The probability of this scenario is 25%, and the S&P 500 would rise by 0%–0.75% as a result.

• NFP between 45,000 and 75,000: The probability of this scenario is 40%, with the S&P 500 expected to fluctuate between a 0.5% decline and a 0.5% gain.

• NFP between 15,000 and 45,000: The probability of this scenario is 25%, with the S&P 500 expected to fluctuate between a 1% decline and a 0.25% gain.

• NFP below 15,000: The probability of this scenario is 5%, and the S&P 500 would fall by 0.5%–1.5% as a result.

If the NFP data significantly exceeds expectations, it will put collective pressure on growth-oriented technology stocks, indirectly leading to a decline in the Nasdaq. Conversely, if the NFP data is significantly lower than market expectations and the unemployment rate rises, it may heighten expectations for rate cuts, and lower nominal interest rates would directly benefit the growth-tech sector.

Goldman Sachs (GS) Global Macro Research Strategist Vickie Chang stated that due to the attack in Iran and its impact on the market, the level of attention on employment data might not be as high as usual.

Goldman Sachs expects the February NFP to show an increase of 45,000 jobs and the unemployment rate to rise to 4.4%. If the data remains neutral, the market may not be in a hurry to price it in, particularly given the uncertainty regarding the path of energy prices.