Buy the rumor, sell the news? Traders brace for NFP

• ADP Disappoints; JOLTS confirms some weakness.
• Service PMI” s though remains in the expansion zone.
• Today is all about the monthly NFP report – Mkts on edge.
• Gold is headed for another week of gains. Oil flat, Bonds Up.
• Try the Risotto Al Amarone.

Stocks advanced after the latest round of eco data suggested the labor market is weakening faster than expected. ADP reported just 54k new jobs vs. the 68k forecast, while Initial Jobless Claims came in hotter at 237k vs. 230k. This follows Wednesday’s JOLTS report, which also pointed to softening — reinforcing the idea that the Fed may not just deliver three cuts this year, but that at least one of them could be more aggressive (think 50 bps).

We actually got some bullish data yesterday, but the market chose to ignore it because it doesn’t fit the current narrative. Both the S&P and ISM PMIs came in strong—54.5 and 52—comfortably in expansion territory. But as I said, the algos brushed it aside. You can bet that if the numbers had been negative, that would’ve been the headline.

By the closing bell: the Dow gained 350 pts (+0.8%), the S&P rose 53 pts (+0.8%), the Nasdaq jumped 209 pts (+1%), the Russell added 30 pts (+1.25%), Transports tacked on 57 pts (+0.4%), and the Equal Weight S&P climbed 54 pts (+0.7%). Leading the parade? The Mag 7 — up 400 pts, or +1.3%.

Bonds got bought, sending yields lower. The 10-year fell 5 bps to close at 4.16%, breaking below the 4.20% level that should have provided support—but didn’t. So down yields go, pushing bond prices higher. The 30-year slipped 3 bps to end at 4.85%.

Interestingly, mortgage rates have also been drifting lower. Freddie Mac is offering 30-year mortgages at roughly 6.5%, while Zillow notes some deals as low as 6.4%. That’s a clear pullback from the 7% levels we saw not too long ago.

Lower rates are good news for buyers, but they’re not rushing in just yet. Many are staying patient, waiting for housing prices to soften further. If the Fed cuts aggressively, mortgage rates will likely continue to move lower—eventually drawing more buyers back into the market. Will we see bidding wars again? Will we see buyers buy houses sight unseen?

Oil fell again—down 1% to close at $63.34 after briefly touching trendline support at $63.27. This morning oil is unchanged. A couple of factors are at play. First, crude stockpiles rose more than expected which some are quick to frame as waning demand (a narrative I don’t buy). Second, OPEC+ meets on September 7th, and the buzz is that they may “discuss” raising production.

And then, of course, our friends at Goldman Sachs chimed in, declaring there’s a supply glut. To which I’d say did you just figure that out? We’ve been talking about the massive oversupply from OPEC+ and non-OPEC producers for months now. But let’s be clear: a supply glut doesn’t mean demand is collapsing. It simply means supply is running ahead of demand—two very different stories. And that’s not necessarily negative.

In fact, I remain firmly in the camp that demand is set to surge. Data centers are popping up across the globe, and the energy those facilities consume is nothing short of exponential. That demand story is only just beginning. And if you need proof—take a look at Utilities. The XLU is up 10.6% year-to-date, outperforming both the Dow and the S&P. Utilities aren’t just for retirees and widows anymore—they’re becoming a front-line play on the energy transformation.

Gold lost $13 yesterday to settle at $3,545 as traders rang the register, but let’s not kid ourselves — it’s still on pace for its third straight weekly win. And this morning, it’s up $3 at $3,550, sitting just a hair below its record high as we all wait for today’s report.

Now technically speaking, gold is stretched — the RSI is flashing 73.7 (anything above 70 is overbought), which means we’re in that “danger zone.” So, what’s happening? Classic case of buy the rumor, sell the news. If today’s data confirms labor market weakness and all but guarantees a rate cut, don’t be shocked if we see more profit-taking as traders cash out some winnings.

Remember — the expectation here is clear: today’s report should confirm a weaker labor market, setting the stage for the start of a cut cycle. And we’re not just talking about one cute little trim — the market’s now pricing in at least 75 basis points of cuts by year-end.

Today is all about the NFP report. Expectations are for a soft gain of just 75k jobs, but after yesterday’s weak ADP print, it’s anyone’s guess what we actually get. Remember, these two reports don’t always complement each other—sometimes they align, sometimes they don’t.

Traders and algos will be on edge this morning. A stronger-than-expected NFP would take some wind out of the aggressive rate-cut narrative they’ve been trying to build. A weaker print, on the other hand, will only embolden that story—and you can expect the calls for deeper cuts to get louder.

US futures are confused! Dow -20, S&P’s up 13, Nasdaq up 115 while the Russell is up 3. We are only hours away from knowing the answer. And then we wait until Wednesday the 17^th to hear the official news at 2 pm and then wait for JJ to present the committee’s findings in the ‘after party’ at 2:30 pm. Will his tone be more concerned? What lines got deleted from his prior statement and what lines are new – because this is always a key part of how the markets react. In any event, it is Friday, the weekend is upon us, expect all kinds of analysis today and all weekend.

European markets are mostly higher – The UK is in the lead up 0.25% while France continues to lag. UK retail sales gained 0.6% in m/m and that was better than +0.2% expected. Housing prices also gained 0.3% in August.

The S&P closed on its high at 6502 up 53 pts….and that suggests that it will try to push higher today…. Remember, closing on the highs often leads to follow-through (just like closing on the lows often invites another leg down).

Futures this morning are suggesting just that…. We need to trade higher by only 6 pts to create yet another new high for the S&P (futures are suggesting a 13 pt gain right now – but it is 6 am….). You’ll know at about 8:30:05 seconds what the reaction will be.

The algo’s are primed to go in either direction. A weak report will send them into a buying frenzy, while a stronger than expected report will temper that mood.

Risotto Al' Amarone

This recipe comes to me from the Puglia region of Italy. This is the region that represents the heel of the boot – halfway up the calf. It is on the Eastern coast of Italy on the Adriatic Sea. Lucera – is an ancient city – one that is full of wonder and historical significance.

Today I serve up this incredible Risotto dish which is a perfect “primi piatto”.

For this you will need: Vialone Nano Rice – similar to Carnaroli but produces a creamier delicious risotto, Fresh Monte Veronese cheese – this cheese is made from cow’s milk and is produced in Northern part of Verona. It is thought to be one of the great cheeses of the Lessini mountains. Finely chopped onion, butter, beef bone marrow, extra virgin olive oil, beef stock and a 1/2 bottle of Amarone della Valpolicella.

Begin by heating up the Amarone. - do not boil - just slowly heat it.

Bring the beef stock to a boil and then turn to simmer.

In a separate saucepan, heat the butter, bone marrow and a bit of olive oil, sauté the onion. When the onion gets golden brown, add rice, stir and toast over the heat for several minutes. Season with s&p. Slowly add the Amarone – stirring all the time as you add allowing it to absorb in the rice.

To complete - add the hot beef stock one ladle at a time. As it is absorbed add another ladle always stirring with a wooden spoon. Taste and adjust seasoning. Cook until the rice has absorbed all of the broth and the grain retains it texture – do not cook so much that you make it mushy. Turn off the heat; add a dollop of butter and the grated Monte Veronese cheese.

Serve immediately in warmed bowls. It doesn’t get any better than this!