Markets look past strong jobs report... And tech’s next earnings test 9/4/26

CNBC's "Fast Money"

Stocks declined despite a stronger-than-expected August jobs report, which increased the likelihood of a Federal Reserve rate hike to nearly

Key takeaways

• A strong jobs report boosted rate hike odds but led to market declines due to inflation concerns.
• President Trump threatened trade sanctions against countries with U.S. trade deficits, signaling political pressure on the Fed.

Main topics

• Market reaction to strong August jobs report
• Federal Reserve rate hike expectations

Notable quotes

"Good news is not so great news for the markets when it raises the odds of a rate hike."

"We're now back to roughly 75,000 jobs added on average over the last three months... but that's not necessarily in line with labor force growth."

Conclusion

While strong jobs data and political rhetoric have heightened rate hike fears, markets

Transcript preview

Speaker 6 (0:00) It's NFL kickoff time. Wednesday, exclusive NFL team valuations from Michael Ozanian. Thursday, CNBC Sport, live from the NFL's first ever game in Australia with Commissioner Roger Goodell. Speaker 4 (0:12) Starts Wednesday, CNBC. Live from the NASDAQ market site in the heart of New York City's Times Square, this is Fast Money, and here is what's on tap tonight. Stocks dropping to end this week as a stronger than expected jobs report puts a rate hike back on the table. How should you position yourself now going into this long holiday weekend? And software's next big test, Oracle and Adobe set to report their earnings next week. What can we expect to learn from these numbers? And what could it all mean for the AI trade? Plus, NVIDIA bucking the downtrend in the Mag 7 space. Apple pulls back ahead of next week's big iPhone reveal. And Lululemon hits more than eight-year lows. Can this one-time pandemic darling do anything to get its groove back? We will debate that. I am Frank Holland from Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, we have Steve Grasso, Courtney Garcia, Tim Seymour, and Bonoan Eisen. We start with the latest example of good news being, well, not so great news. Stocks lower across the board today with the Dow falling back into negative territory for this week. The S &P, the NASDAQ, and the NASDAQ 100 all just managing to stay in the green since Monday. Today's moves come after the August jobs report shows payrolls. They rose by more than three times the estimates. July's unexpected contraction was also then revised to a gain. That labor market strength pushed up chances of a September rate hike by the Fed substantially. Odds now stand at nearly 60 percent compared to about 50-50 before the report. But President Trump this afternoon doubling down on his calls for a rate cut. Mr. Trump threatening to cut trade with partners if the Fed doesn't act as he wants them to. Our Megan Casella joins us now with the very latest. Megan. Speaker 7 (1:52) Frank, that's right. This was the president going after both the Federal Reserve and all countries with which the U.S. has a trade deficit. That is most of the U.S.'s major trading partners. It was a stark threat on Truth Social. He said, without the U.S. agreeing to allow these countries their big surpluses, and we could stop that immediately, they would no longer be considered financially elite. Lower the rate or I'll stop trading with countries with which we have a deficit. And the president then went on to elaborate on these threats, really double down on them, this afternoon in the Oval Office. Take a listen to some of what he said. Speaker 3 (2:23) If we don't trade with them, they don't have any money to pay the bills. And if we're not going to be treated properly, we're going to do that. And all we have to do to cut our trade deficit with the country is not trade with them. Speaker 7 (2:39) Frank, I'll add here that most economists do not believe running a trade deficit is a bad thing. That was not something the president was acknowledging here, but he was doubling down on this. He was not acknowledging either that doing this would likely drive up inflation, make goods more expensive, really shake the economy and lead the Fed more likely to hike rates. What he was doing here is saying that this might not be. something that he's going to do imminently, but more likely a direction or a new way that he's threatening the Federal Reserve, another way, something that we haven't heard before, another way of threatening them to cut those rates. Frank. Speaker 4 (3:10) All right, Megan Casella with the very latest. Megan, thank you very much. Have a great weekend. Tim, I want to come over to you. What do you make of what the president has to say and also that much stronger than expected jobs report? Speaker 3 (3:20) Hey, Frank. Well, I think running a deficit as we have in this country is certainly against some of the biggest trading blocks as a privilege. It's not something that's an insult. And in fact, it's kind of to me, this is effectively where we sit and where we debated, you know, was this two years ago? I think the the trade numbers that we have and if you look at what China's doing with the rest of the world, you could make an argument that they're. Their trade as a percentage of GDP has never been better. Their surplus has never been higher. And that could draw rancor from the United States specific to China. But I think the relationship we have with the rest of the world is not a function of where our interest rate policy is. And I don't think that really should be driving Fed policy. I don't think it will. I think the payroll numbers today. depending on how you look at it. We're now back to roughly 75,000 jobs added on average over the last three months, which is not necessarily in line with where the labor force is growing. So in other words, there is a bit of a draw, I think, and some tension on the unemployment rate to the downside. So at least in the current labor market, I realize. August was better than July. You can you know, these are lumpy figures. But for the most part, I think this is a number that does put the Fed back in play. Although, again, I don't think this is extraordinary one way or the other. But I do think that the Fed, who has been focused more on inflation than weakness in the labor market, got enough strength in the labor market today to focus now on inflation. Speaker 4 (4:53) All right, Courtney, I want to come over to you. Do you think that this incredible jobs for, I mean, three times the estimates, also a revision again in July, does that raise the chances of a hike coming up? Speaker 7 (5:02) Yeah, I mean, this is one of those scenarios where we're getting to that narrative where good news is bad news for the markets, right? I mean, this shows that we are in a strong economy, which should be a good thing, but it raises the likelihood that the Fed's going to increase interest rates, and that's what the markets don't like to see. But I think what was pretty interesting was the fact that semis actually did well today. So things that are long-direction assets, tend to do poorly when you're seeing interest rates go up. But that's not happening, which means the markets are, I think, ultimately going to start to look through this, just like semis did, because earnings, I think, are going to be the bigger driver. And if the economy and earnings continue to be in good shape, I think that is a good thing. But I think more than likely the Fed's going to, you know, stay or raise rates from here. The fact we're talking about cutting right now is really out of left field. I don't know where this is coming from. Speaker 4 (5:45) All right. Just to your point, by the way, LSA came out with the adjusted earnings growth numbers, 35 percent earnings growth adjusted. for this quarter with about, I think, 492 S &Ps companies already reporting. So pretty much over. Steve, when I come over to you, just as a sidebar, I was just kind of looking up some of the countries that we run a trade deficit with. It's China, it's Germany, it's Mexico. Is Vietnam there? It's a lot of big trade. I don't have that one, but it's a lot of big trade partners. I Speaker 1 (6:08) think it's everybody, right? I mean, I think it's pretty much everybody. But when you look at where he wants lower rates, it's been out there. And I think he's trying to... He had the tariffs on main stage. Now he's got trade imbalances on main stage. But when you look at the jobs number that we came into this, Tim talked about the three-month average around 70,000. I have the 12-month average around 31,000. These aren't big numbers. These aren't strong numbers. And we had CPI last month that was at a five-year low on core, right, 2.5%. So I don't think one number, and I don't think anyone is saying this, but I don't think one number is the reason why we should raise or cut rates. But if you look at where we're coming from, there's a reason to sit on your hands and maybe wait it out. He's got a bunch of task force that he developed now. I think you have to wait till they report. And then what else do we have? Scott Besant is thinking about putting some of his balance sheet to work this month as well. This will be the first purchase he does at the long end. I think they're trying to triangle eyes around everything. He wants lower rates. I think we should just sit on our hands. Bono, I'm coming over to you. Speaker 2 (7:20) Yeah, I tend to agree with Courtney. I think lower rates are a bit challenging. And I think that the job numbers today essentially remove that from the table. I'm not willing to go as far as to say that the numbers were robust enough to suggest that there was a hike. You also had wage growth inflation that clearly wasn't a scary figure at 3.1 percent. So that's roughly in line. So that gives you a little bit of wiggle room to the downside to acknowledge Steve's point. But I don't think you're seeing. the weakness within the labor force that would suggest a need to cut. And then you just mentioned a 35 % earnings growth. I mean, that shows robust market data, robust wealth creation. So, you know, I think anytime you're starting to kind of talk about on-shoring and inflationary pressures, I think there are secondary effects. For example, you're already seeing the Norwegian sovereign wealth fund looking at pulling out of some of its treasury holdings and diversifying away into higher yielding assets. So you're already seeing some other type of signs that would suggest that you may not actually get the end point that you're looking to achieve by lowering rates. Because if you get sovereign wealth funds, acknowledging that the amount that they're talking about withdrawing is not largely significant, but as an indicator of direction, that would likely push yields higher. And then you're kind of, you know, undoing what it is that your target objective was to begin with. Speaker 4 (8:49) You know, one other thing I was just kind of thinking about is that we hear the president talking about not trading with countries we have a deficit with. At the same time, we have Xi coming up and sometime in September and a report from Reuters today that a lot of Chinese rare earth exporters aren't exporting to the U.S. So, Tim, I want to come to you. I know you focus a lot on international markets. Is this just a concerning sign for the global state of play, the fact that we have the Chinese president coming here? We need the rare earths and the president's talking about not doing trade. Speaker 3 (9:15) The headlines were that China coming out of the G20 wasn't happy with tariffs as a, you know, essentially as a wedge that's been driven and obviously the pressure from the Iran war. So I do think there is some pressure going into the Trump-Xi summit. As I noted, the China trade figures are extraordinary. They've never been better. And some of this I really do think is both industrial and technology, China exporting to the rest of the world. Speaker 3 (9:44) These are all part of the calculus that feeds into where deficits are. I think what's going on with the long end of the U.S. curve, as we talk about often, is a function of mass issuance by investment-grade players, not just sovereigns, so government debt. excuse me debt yields going up around the world because it's not just the united states i mean it's it's japan it's germany uh germany of all places if you think about relative change talk about a philosophy change uh to a economy but a finance ministry that was extremely austere and was never running deficits the idea of printing uh well printing euros, but running deficits to build out defense and energy security is what the entire world is doing. I think it's putting pressure on rates everywhere. I think the United States happens to be, you know, just another play there. Speaker 4 (10:37) All right. We want to turn back to today's jobs report. Let's bring in Mark Zandi, chief economist at