Payrolls triple forecasts and reopen the Fed's hike debate

• Wall Street ended Thursday firmly higher: the S&P 500 closed up 1.06% at 7,747.71, the Nasdaq Composite gained 1.40% and the Dow added 1.18%. Since the 08:30 ET jobs print, S&P 500 futures are trading 0.2% lower while Nasdaq 100 futures hold a 0.1% gain — the only live read on the US day.
• Europe is mid-session and largely unmoved by the print: the DAX is up 0.54%, the Euro Stoxx 50 0.25%, the FTSE 100 flat at 10,832.26 and the CAC 40 fractionally lower. Asia finished before the data and finished well: the Nikkei 225 ended up 1.26%, the Hang Seng 1.74% and the Kospi 1.64%, while the Shanghai Composite closed 0.30% lower.

The August employment report is the whole of this morning. Payrolls rose 162,000 against a consensus of roughly 55,000, with private payrolls at 127,000 versus about 45,000 expected, unemployment steady at 4.1% and average hourly earnings up 0.3% on the month and 3.1% on the year. July was revised from a 23,000 loss to a 21,000 gain. The composition is softer than the headline — education and food services accounted for the bulk of the increase — but the direction is unambiguous.

That matters because this Fed is debating whether to tighten, not ease. Thursday's rally was built on Governor Christopher Waller leaning towards holding rates steady, which pared bets on a September move; futures had settled near a coin toss for the 16–17 September meeting. A jobs number three times consensus pushes back the other way, and the tape has responded in textbook fashion: the five-year Treasury yield is up 5.5 basis points to 4.564% and the two-year sold off hardest, the dollar index has added 0.29% to 99.29, gold is down 1.22% at $4,437.10 and equity futures have given back a little of Thursday's gain.

The separate story is the yen, up 2.04% against the dollar at 155.68 as leveraged carry positions are unwound ahead of the Bank of Japan's 18 September decision, after hawkish comments from Governor Ueda and board member Takata raised the prospect of an outsized hike. A stronger funding currency forces those trades to be closed, which is why the move is so abrupt.

Positioning is constructive rather than nervous. The VIX is at 14.19, barely changed and around 60% below its 52-week high; the MOVE index of rates volatility closed Wednesday down 6.3% at 74.7, so the bond market is not pricing a policy accident. Thursday's advance was reasonably broad by PrimerIQ's own count of the US universe — 3,408 advancers against 2,327 decliners, a 1.46 ratio, mean move +0.6% — and led by rate-sensitive cyclicals, with financials up 1.56% and consumer discretionary 1.39%, against energy down 0.74% and staples 0.32% lower. The tell today is the safe-haven complex going the wrong way for a defensive session: gold lower, dollar higher, bonds cheaper. Crypto is the exception, with bitcoin off 2.1% at $79,547.

The August employment situation report landed at 08:30 ET this morning: 162,000 jobs added versus consensus near 55,000, unemployment unchanged at 4.1%, participation up to 61.6%, average hourly earnings +0.3% month-on-month and +3.1% year-on-year, and a net upward revision of 55,000 to the prior two months. Nothing else of comparable weight is scheduled in the US session; the calendar thins into the weekend and attention now turns to the FOMC on 16–17 September and the Bank of Japan on 18 September.

Lululemon is the pre-market casualty, having reported after Thursday's close with second-quarter revenue down 4%, comparable sales down 9% and a third guidance cut of the year — full-year revenue now seen at $10.35–10.5bn against $11–11.15bn previously — with an EPS beat flattered by $134.5m of tariff refunds. Thursday's session had already digested Snowflake, which jumped on a product-revenue beat and raised full-year guidance, and Ciena, which fell despite record quarterly revenue as margin guidance disappointed. Nothing material is scheduled to report today.