Waking up, the market has reversed again.

Previously, concerns about the "rising expectations of the Fed's rate hike in September" had been weighing down the U.S. stock market. However, last night, with the release of the ADP employment data, the U.S. stock market finally stopped declining and rebounded: the Dow rose by 0.56%, and both the S&P and Nasdaq gained 0.46%, ending three consecutive trading days of decline.

1. A "bad" employment data becomes a lifeline for U.S. stocks

What allowed U.S. stocks to catch their breath was the ADP employment data (commonly known as "little non-farm"): the U.S. added only 38,000 jobs in August, falling short of the expected 48,000, marking the worst performance since January of this year.

Once the data was released, the ripple effect was immediate: U.S. bond yields plummeted, the stock market turned positive, and gold surged.

The logic is the same old script—employment data is a core indicator, alongside inflation, affecting the Fed's decision on interest rate hikes and cuts. Strong employment indicates an overheating economy, necessitating a rate hike to cool it down; weak employment suggests a cooling economy, which instead provides room for monetary policy easing. Therefore, the not-so-good ADP bad news turned into good news.

2. Don’t celebrate too early: Friday's non-farm payroll is the real test

However, the relief brought by the little non-farm data is only temporary. This Friday, the official non-farm employment report will follow.

It is necessary to pour a bucket of cold water: the ADP data has historically been regarded as a preview for the non-farm report, but there is no stable linear correlation between the two—weak little non-farm data does not necessarily mean the big non-farm data will be poor.The market currently generally expects that August's non-farm payrolls will slightly recover, with about 55,000 jobs added, significantly higher than July's -23,000.

According to the CME FedWatch Tool, the likelihood of a Fed rate hike in September only slightly dropped to 62.3% after the little non-farm data was released— the risk of a rate hike is far from eliminated. This is precisely the reason why this Friday's big non-farm data is crucial.

3. How does the Fed view employment? Waller's attitude is subtle

Even with a somewhat weak little non-farm data, Fed officials' overall assessment of the labor market remains optimistic.

Waller's speech at the Jackson Hole annual meeting last week revealed this subtle stance: he acknowledged that there are some localized concerns in the labor market but emphasized that the overall situation aligns with full employment. His exact words were, "As labor supply growth has nearly stalled, monthly job gains will naturally be low. But overall, most people who want to work can still hold or find jobs."

This statement is not baseless. Current tightening of immigration policies, declining birth rates, and population aging are three factors that are collectively suppressing the growth of the U.S. labor force—fewer new jobs does not necessarily mean "weak demand," but could also indicate "tight supply" where there are no people to hire. Government data simultaneously shows that the unemployment rate is still at a historic low, which supports the core judgment of Fed officials: the labor market is basically balanced, and policy focus can continue to be placed on curbing inflation.

In other words, a weak ADP alone is still not enough for the Fed to change its stance.

4. Final thoughts

The current situation can be summarized in one sentence: the rebound is real, and the risks are also real.

The little non-farm data has pushed the September rate hike probability down from a high point, but the 62.3% figure means that there is still a significant chance in market pricing that believes a rate hike will come. If Friday's big non-farm data far exceeds the expected 55,000, the recently repaired sentiment may quickly reverse again.

This "rebound window combined with data judgment" moment is precisely when the value of using options tools on the BIT brokerage platform is realized; if the data is favorable, the underlying stock continues to gain; if the data crashes, the payouts from options will catch the downside. After all, insurance is always cheapest when bought on a sunny day.

Disclaimer: This article is written by an external author, and the views expressed do not represent the position of BIT. This article does not constitute any investment, trading, financial, legal, or other professional advice, nor does it constitute an offer, solicitation, or recommendation of any asset, security, or financial product. The market views, data, and analysis mentioned herein are based on information available at the time of publication, and related data and market expectations may change at any time, and do not represent future performance. Options investments involve risks, especially derivatives like options that may have high risks; investors may lose all invested capital and even incur additional losses. Any investment decision should be based on individual circumstances, risk tolerance, and independent judgment, and professional advisors should be consulted when necessary. BIT does not guarantee any investment results or returns.

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