Strong Jobs Data Triggers September Rate Hike Expectations
The August payrolls report showed a much stronger-than-expected job growth, adding 162,000 jobs and keeping the unemployment rate steady at 3.8%. The surprise beat pushed the odds of a September interest rate hike up to around 60%, according to CME FedWatch.
This development sent shockwaves through financial markets, with the major U.S. indexes initially trading lower. However, instead of a broad risk-off move, sector rotation became increasingly visible as investors adjusted their expectations for a near-certain September rate hike.
The market's reaction was unexpected, given that hot CPI data had already pushed the odds of a Fed rate hike higher. The combination of strong jobs and easing geopolitical tensions helped to shift investor focus from 'will they hike?' to 'when will they hike?'