Bond Market Wagers on Fed Rate Cut Crumble on Jobs Data Void

Bond

Summary:

US Treasury yields edged higher, with rates on two-year notes — which closely reflect changes in monetary-policy expectations — rising about two basis points to 3.59%.

Bond traders all but scrapped their bets on a December interest-rate cut after the government canceled the publication of the October employment report, leaving Federal Reserve officials without a key piece of economic data before their final meeting of the year.

The Bureau of Labor Statistics said Wednesday that some October jobs data would be rolled into a report to be published after the Fed’s December decision. The announcement prompted traders to scale back expectations for a quarter-point reduction, with odds now heavily pointing to policymakers keeping the benchmark rate on hold at the 3.75% to 4% range.

“This lowers the chances of a December rate cut,” Morgan Stanley economists led by Michael Gapen wrote in a note. “An easing labor market is the key argument for a December rate cut.”

Market sentiment had already been shifting toward a greater likelihood of no action at the Dec. 10 meeting, as several Fed officials have urged caution about reducing borrowing costs while inflation remains above the central bank’s 2% target. The updated BLS schedule leaves policymakers — and traders — lacking new evidence of labor market weakness, their justification for rate cuts in September and October.

The announcement sparked a wave of selling in fed funds futures. Swap contracts linked to the Fed policy rate implied an about 30% chance of a cut in December. Before Wednesday, the odds were roughly 50-50. For next year’s first meeting in January, about 21 basis points of easing remained priced in. Bond Market Wagers on Fed Rate Cut Crumble on Jobs Data Void_1

Bond Market Wagers on Fed Rate Cut Crumble on Jobs Data Void_1

Reinforcing the trend, minutes of the Federal Open Market Committee’s Oct. 28-29 meeting released Wednesday showed that “many” Fed officials said it would likely be appropriate to keep interest rates steady for the remainder of 2025.

US Treasury yields edged higher, with rates on two-year notes — which closely reflect changes in monetary-policy expectations — rising about two basis points to 3.59%.

In a statement, the BLS said the federal government shutdown from Oct. 1 to Nov. 12 inhibited collection of the part of the October jobs report that includes the unemployment rate. Other October employment data will be published Dec. 16 with the November report, originally slated for Dec. 5.

“We already knew that there wouldn’t be an October unemployment rate but the news that the November data will not get published until after the Fed meeting should be a disappointment for the market,” said Leah Traub, a portfolio manager at Lord Abbett & Co. “This reduces the probability of a cut given the divided FOMC.”

Source: Bloomberg

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Manuel

Economic

"Employment Situation" jobs report for October, the agency said on Wednesday, citing its inability to adequately collect data during the government shutdown.

The BLS also announced that the November jobs report, originally scheduled for release on Dec. 5, will now be published on Dec. 16 and will contain what October data the agency was able to collect. The September jobs report, which was also delayed due to the shutdown, is scheduled for release on Thursday.

"Household survey data from the Current Population Survey could not be collected for the October 2025 reference period due to a lapse in appropriations," the BLS said, noting that the household data is "not able to be retroactively collected."

The monthly "Employment Situation" jobs reports are crucial and widely watched data releases that give the market an overview of the health of the labor market throughout the US. The Federal Reserve also leans on the jobs report for key input on its interest rate policy decisions.

Traders are currently predicting a 68.4% chance that the Fed holds the target rate steady, with no cut, when the Federal Open Market Committee meets in December.

However, "the jobs data could skew this pricing if it confirms a further softening of the labour market, which would play into the narrative of a weakening US economy, a key theme that has emerged in recent days and is driving some of the weakness in equities," Capital.com analyst Daniela Hathorn said.

Fed governor Christopher Waller, seen as a frontrunner to be the next Fed chair, and Fed governor Stephen Miran have both called for rate cuts at the Dec. 9-10 meeting.

When September numbers are announced on Thursday, Wall Street economists are expecting to see 50,000 job gains, according to Bloomberg data.

Thursday's release will be the first jobs report since the August numbers, which were published before the shutdown began. The August jobs report showed the unemployment rate at 4.3%. The Federal Reserve Bank of Chicago estimated that the unemployment rate inched up slightly to 4.35% in September.

Private payroll numbers from data provider ADP showed private-sector payrolls increased 42,000 in October after declining in the prior two months.

Source: Yahoo Finance

To stay updated on all economic events of today, please check out our Economic calendar

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Manuel

Political

Stocks

President Vladimir Putin on Wednesday called for a national task force to coordinate Russia's work on homegrown generative artificial intelligence models, which he said were vital to preserving Russian sovereignty.

Putin said large-language models have become a major instrument in spreading information and are capable of influencing the views of entire nations. He added that dependency on LLMs designed in other countries was not acceptable for Russia.

"For Russia, it is a matter of national, technological and value-based sovereignty. Therefore, our country must possess a comprehensive set of its own technologies and products in the field of generative AI," Putin said at AI Journey, Russia's flagship AI event.

Putin said the task force should focus on developing data centres across the country and ensuring nearby energy sources such as small-scale nuclear power stations.

While Russia lags the United States and China in AI, two large-language models, Gigachat and Yandex GPT, have been developed by the country's main AI-focused companies, Sberbank and Yandex.

Sberbank, which grew from a traditional bank into a technology company, announced a new version of Gigachat on Wednesday and presented AI-powered products, from humanoid robots to health-scanning ATMs, to Putin.

Putin said that AI-powered technologies' contributions to Russia's gross domestic product should exceed 11 trillion roubles ($136.57 billion) by 2030. He called for development of a national AI implementation plan in addition to a task force and urged state institutions and companies to make increasing use of AI.

By blocking hardware imports including of microchips, Western sanctions have been an obstacle to Russian efforts to expand computing capacity and develop AI.

Putin warned against excessive regulation of AI but said only Russian models should be used for national security and intelligence gathering to ensure data does not leave the country.

Source: Reuters

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Manuel

Stocks

Nvidia (NVDA) will report its highly anticipated third quarter earnings after the bell on Wednesday, its first such announcement since the company's market capitalization briefly eclipsed $5 trillion last month.

The earnings reveal comes as Wall Street grows increasingly anxious over the state of the AI trade, with investors and analysts flagging bubble concerns amid high valuations. Nvidia's stock rose as much as 3% Wednesday in the lead-up to earnings, but shares have lost around 10% since its latest all-time high amid a broader market slide.

Even as other tech behemoths have reported strong earnings, the chip giant is the most important bellwether for the AI trade. Any miss or beat on projections set to impact price action on a wide array of AI stocks. The report could also trigger a $320 billion swing in the chipmaker's market value, according to data from analytics firm Option Research & Technology Services (ORATS). That would be the largest post-earnings move ever for Nvidia.

According to Deepwater Asset Management managing partner Gene Munster, a beat and raise scenario may not necessarily be a good thing for the broader AI trade.

"The cross currents ... set up a Catch-22 for the AI complex, because stronger guidance can amplify worries about overspending, while a modest raise can be read as the first sign that growth is normalizing faster than expected," he wrote in a note to investors.

The report comes after Peter Thiel's hedge fund sold off its entire roughly $100 million stake in Nvidia. SoftBank Group (SFTBY) also unloaded all of its Nvidia stock, valued at $5.8 billion, as the company seeks to fund its own enormous AI bets.

It also follows remarks from Advanced Micro Devices (AMD) CEO Lisa Su during the company's Financial Analyst Day, during which she said that she believes the data center market will be worth as much as $1 trillion by 2030.

Going into Nvidia's earnings, investors will be on the lookout for how much of the company's revenue continues to come from hyperscalers like Amazon (AMZN), Google (GOOG, GOOGL), and Microsoft (MSFT). The chip designer regularly points out that roughly 50% of its data center revenue comes from those companies, and as competition heats up with AMD and cloud players tout their own AI processors, that reliance could become a liability.

But the AI trade also gained a major detractor last week in investor Michael Burry, who famously shorted the housing market ahead of the 2008 financial crisis. In a post on X, Burry claimed that companies, including Meta (META) and Oracle (ORCL), are artificially boosting their earnings results by understating the depreciation of data center equipment.

For Q3, analysts are anticipating adjusted earnings per share (EPS) of $1.26 on revenue of $55.2 billion, according to Bloomberg consensus data. That would represent increases of 55% and 57% increase versus the $0.81 EPS and $35.1 billion the company reported in the same period last year.

Of that $55.2 billion, $49.3 billion is expected to come from Nvidia's data center business. Gaming is projected to bring in $4.4 billion.

Gross margins should decline 1.84% to 73.62% versus the 75% the company saw in Q3 last year.

Nvidia has said it isn't modeling any revenue from China. There was hope that the company would be able to begin shipping its chips into the world's second-largest economy as part of a US-China trade deal.

But there has been no movement on that front despite President Trump and Chinese President Xi Jinping holding a high-profile meeting in South Korea in late October.

Source: Yahoo Finance

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Justin

Russia-Ukraine Conflict

The U.S. has signalled to President Volodymyr Zelenskiy that Ukraine must accept a U.S.-drafted framework to end the war with Russia that proposes Kyiv giving up territory and some weapons, two people familiar with the matter said on Wednesday.

The sources, who asked not to be identified because of the sensitivity of the matter, said the proposals included cutting the size of Ukraine's armed forces, among other things. Washington wants Kyiv to accept the main points, the sources said.

Source: Reuters

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Devin

Stocks

The longest slide in US stocks since August has created an opportunity for dip buyers, according to JPMorgan Chase & Co.'s trading desk.

Worries over everything from the durability of the artificial intelligence trade to the Federal Reserve's monetary policy path have contributed to a four-day selloff that shaved 3.4% from the S&P 500 Index through Tuesday's close. To Andrew Tyler, head of global market intelligence at JPMorgan, that decline represents a "technical washout" in equities that may have already ended.

"Given that there have not been any changes to the fundamental story, nor does our investment hypothesis rely on the Fed easing, we are dip-buyers," Tyler wrote in a note to clients on Wednesday.

With stocks higher on Wednesday morning, traders are awaiting earnings from AI-bellwether Nvidia Corp. after the close and the September non-farm payrolls report later in the week. The two events "could set the stage for the next run to or through all time highs," Tyler wrote.

Though the S&P 500 is still expensive by historical standards, the selloff has taken its 12-month forward price-to-earnings ratio to 21.9, the lowest level since August, according to Bloomberg data. At the same time, a Deutsche Bank measure showed equity positioning slipping back to neutral last week with discretionary investors turning underweight, suggesting they may have dry powder to buy stocks in the near-term.

To be sure, stretched positioning and elevated valuations in equities have drawn warnings from some market participants in recent days: Goldman Sachs Group Inc. President John Waldron said on Wednesday that markets could see further losses. Algebris Investments' founder and chief executive officer, meanwhile, warned investors to reduce allocation to the world's top technology companies as he made a bearish case for AI.

The S&P 500 is down 3% this month, on pace for its worst November since 2008, amid worries over whether artificial intelligence is generating enough revenue or profit to justify the massive spending on infrastructure.

Tyler, on the other hand, noted several encouraging signs, such as improving market breadth, with roughly 50% of S&P 500 stocks closing higher on Tuesday.

Regarding Nvidia's earnings and AI, Tyler wrote that the bank doesn't "see investors blindly chasing low/unprofitable companies tied to the AI theme" even if earnings are strong.

"If the net result of NVDA's earnings is the market expressing a more concentrated view on AI, then that is a positive, pushing the index higher while also assuaging bubble concerns," he said.

Source: Bloomberg Europe

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James Whitman

Economic

Kevin Hassett, one of President Donald Trump's finalists to become Federal Reserve chair, said there's space for Congress to look at enacting tariff rebate checks next year.

"We're making so much progress on reducing the national debt that I think it's fair to think about what other policies we might pursue" in a so-called reconciliation bill in 2026, Hassett, director of the White House National Economic Council, said Wednesday in a discussion hosted by Bloomberg Economics.

"With all the tariff revenue that's coming in without causing stagflation, I think it would definitely be on the table to think about," he said, referring to the payments proposal which Trump has been advocating.

Hassett also said consumer price pressures may not yet be fully tamed following a surge in recent years.

"We lost control of inflation in recent memory, and it's more under control now — maybe not all the way there," he said.

Because wages didn't go up in step with prices as inflation soared, real incomes declined, so "people are right to say that there's been a problem with affordability," Hassett said. He said that Alan Greenspan had called out "reckless" fiscal spending when he was Fed chair, and highlighted the inflation risk of such policies.

Asked whether he himself would do that if he became Fed chief, Hassett said he wouldn't have called inflation "transitory" if it wasn't — alluding to current Fed Chair Jerome Powell's characterization of the 2021 acceleration in price increases at the time.

The NEC director said Trump's policies are now helping to push real wages higher. "But if you were to be as fiscally irresponsible as the previous Congress was, then you would for sure see inflation go up," he said.

Federal budget data show that the US debt continues to climb in dollar terms. The government ran a $1.78 trillion deficit for the fiscal year through September, little changed from the $1.82 trillion logged for 2024.