Wall Street "Braces for" Nonfarm Payrolls Super Week!

Last week, as Federal Reserve officials expressed diverging views on the direction of monetary policy and some economic data came in better than expected, traders scaled back their bets on further Fed easing. This makes this week—a "super week" packed with key data releases including the nonfarm payrolls report—particularly crucial.

However, simultaneously, financial markets face another major variable this week: a potential federal government shutdown, which could begin on October 1st, potentially delaying the release of critical data, including Friday's highly anticipated nonfarm payrolls report...

Looking ahead, traders currently price in about an 80% probability of a Fed rate cut at the October 28-29 policy meeting. While this probability is not insignificant, they may still require more soft data to confirm the view that the labor market is cooling, thereby solidifying market expectations for further Fed easing.

Last week, the yield on the 10-year U.S. Treasury note unexpectedly surged to around 4.2%. Previously, this benchmark yield had fallen to a five-month low below 4% on September 17th. That was when the Fed restarted its easing cycle with a 25-basis-point rate cut, despite dissent from new policymaker Stephen Milan, who argued for a larger 50-basis-point cut. The反常 rise in Treasury yields following the rate cut was partly attributed to supporting data showing a drop in initial jobless claims and strong Q2 GDP growth.

Nevertheless, the latest data undoubtedly suggests that the U.S. economic situation might not be as dire as feared—even in the employment sector, which the Fed is particularly concerned about. These outperforming economic reports have led traders to slightly temper their expectations for Fed easing through the remainder of the year. The CME FedWatch Tool now shows the market expects about a 62% probability of the Fed cutting rates by another 50 basis points within the year, significantly lower than the nearly 80% probability seen a week ago.