Markets pivot to zero 2026 cuts/H2 2027 (Dec hold 77%, hike 10%) amid NFP 178k/hot jobs/oil shocks (Hormuz)/yield spikes; JPM/Citi/Goldman/MS/Wells diverge on hold vs Sept+ cuts/hikes
Key Questions
What was the recent Non-Farm Payrolls (NFP) figure and its market impact?
The NFP reported 178k jobs, beating expectations along with strong ADP data. This crushed Treasuries, reduced rate cut bets, and pressured equities amid yield spikes.
How have markets adjusted expectations for Fed rate cuts in 2026?
Markets are pivoting to zero cuts in 2026, with some pricing cuts only in H2 2027. CME futures show a 77% probability of holding rates in December and 10% for a hike.
What is JPMorgan's forecast for future Fed rate moves?
JPMorgan predicts no rate cuts through 2026 and a potential hike in Q3 2027. They highlight divergences from market pricing on longer-term cuts.
What rate cut expectations does Citi hold?
Citi forecasts 75 basis points of cuts from September to December. This is driven by recent jobs data, persistent inflation, Iran tensions, and rising gas prices.
Which other banks have revised their Fed rate outlook?
Wells Fargo has scrapped expectations for 2026 cuts. Goldman Sachs, Morgan Stanley, and others diverge on holds versus September cuts or hikes.
What role are oil shocks playing in Fed rate expectations?
Oil shocks from Hormuz tensions and Iran conflicts are fueling inflation fears and a hawkish shift. These are tempered somewhat by potential ceasefires but reinforce higher-for-longer rates.
How have Fed officials influenced the current narrative?
Despite comments from Powell, Daly, Goolsbee, and Hammack, the outlook remains higher-for-longer. Goolsbee and Hammack warn inflation is flashing 'orange' or worse.
What are the broader market reactions to the hot jobs data?
Treasury yields have spiked, stock futures and bitcoin have slipped, and the dollar has gained amid Mideast tensions. Futures pricing and hawkish minutes are reinforced by the data.
NFP/ADP beats crush Treasuries/cut bets/equities; JPM no cuts thru 2026/hike Q3 2027, Citi 75bps Sept-Dec post-jobs/inflation/Iran/gas, Wells scraps 2026 cuts; higher-for-longer despite Powell/Daly/Goolsbee/Hammack; CME hold-heavy/futures pricing, hawk minutes reinforced by data/oil tempered by ceasefire.