Market Momentum: Analyzing Nonfarm Payrolls and the Fed’s Next Move

Wall Street hitting new records on the heels of the June jobs report.

Now farm payroll is rising by 147,000 while the unemployment rate falling to 4.1%.

Well joining me this morning to weigh in and talk about and FOMO is Steve Sos, chief strategist at Interactive Brokers.

Steve, thank you so much for joining me.

Good morning, Remy.

Good to see you.

Great to have you here.

We had quite the first half of 2025, and here we are.

Hitting new record highs yet once again for the S&P 500.

But what are the implications here of the non-farm payrolls and the unemployment rate?

The non-farm payrolls today were a good excuse for a market that wants to rally on a short day ahead of a, you know, that culminates a short week.

You know, I was talking to a friend of mine before we, you know, earlier this morning before the numbers came out, and we're basically like, OK, if the numbers are strong, well the market will rally.

If the market, if the numbers are weak, the market will rally.

Because the federal cut rates, if the markets numbers are strong, they'll say it's a strong economy.

It's just one of those things right now.

That's where it comes back to the momentum and the FOMO.

But looking through the numbers a bit, they're not as in many ways they're not as strong as they seem.

A lot of the hiring was taking place at the state and local level, the labor force, a lot of the improvement in the unemployment rate was because the labor force participation rate went down.

So there's there's some.

There's some nasty stuff hiding under there, and the market's really cut back its rate cut expectations, you know, they were looking for about a 25% chance of a cut in July.

That's about 5% just before I came on was when I last checked, and that and they were looking for almost a September cut with dead certainty, and now that's down to about 75-80%, which is what it was before it came on.

So things have changed.

Bond markets were flexing it.

Stocks are just sort of like, you know what, we'll heads I went.

Yeah, and Steve, it's so important to look underneath the major stock averages to see what's actually happening under the hood and you broke down what's happening in off on payrolls and why the unemployment rate came down, but all of this does come on the heels of yesterday's ADP report, and we all know that good jobs figures still means challenges for the Federal Reserve.

So give us your take on the outlook for the central bank for the second half.

I think first of all I think the chairman is going to dig in a little bit more about you know because he's going to be under a lot of pressure to cut rates.

It's happening all the time.

The president is on his back.

I think he's pulled away from the idea of trying to fire Powell because I think he really, you know what, I think they've got, you know, I think.

Cooler heads have gotten to him and said, you know, the markets will react terribly if you fire him.

Just let his term run out and you'll be done with him, but it doesn't mean he's going to stop trying to bully him.

It also doesn't mean he's going to not try to bully other Fed Fed voting members, and some of whom feel like they're auditioning for the Apprentice Fed chair edition.

So I do wonder, you know, if some of that is some of that is going to happen occur under the surface, but there's nothing in here that says that the Fed can or should be cut.

Rates right now.

The employment number, at least superficially, is strong enough.

Remember the Fed's dual mandate full maximum sustainable employment, well, 4.1% despite the headaches, you know, despite some of the cracks underneath, 4.1% is great.

That pretty much is close to that number or and or stable prices.

And with tariffs coming, we still don't know if we're going to have price stability, so the Fed stays stays on the sidelines until we get some clarity.

Yeah, and clarity is key here, especially as we count down to July 9th, which does come after the holiday weekend, and some of us might be going to the nation's national parks or even perhaps mountain climbing or climbing cliffs, but this whole idea of the wall of worry, where is it on the radar for you?

You know, I don't do much cliff climbing, but I think that's kind of where we are right now.

You know, I don't know if it's El Capitan or what, but basically. you know, there's a lot of worries here.

We don't know how the tariff moratoria are going to play out.

We got there was the deal with Vietnam, but you know, I don't think 20, 20% is a big number, you know, as far as tariffs on a company where we have a lot of imports from them, and imports are kind of sticky.

So that's going to have pressure on inflation, as will the continually weakening dollar.

Today the dollar is a bit stronger because it's reacting to yields.

On top of that, earnings season starts again.

And so you know I do have to think companies got a big pass in April earnings season.

You know, what can you give us guidance?

No, we can't, but you know, stay tuned, and the market really didn't care.

I don't know that I don't know that these companies are going to get a pass a second time in a row, so we're going to have to hear from them what they really think.

And in some cases we've actually seen companies, I'm thinking Micron Progress software being raised and still not get rewarded for it.

So I do have to wonder if that's a challenge going forward.

Yeah, and finally, Steve, before I let you go, we're not in Coney Island riding a roller coaster, but the first half has felt like that.

And as we count down to this holiday weekend, we're also watching what happens on Capitol Hill regarding that big beautiful bill.

So how will tax legislation affect business growth as well as investment moving forward?

The the bill as it's going through is fairly top heavy.

It's very much weighted to high income earners and corporations and quite frankly, to a certain extent that does drive the market to a large extent.

It's people with money to invest who are the ones investing.

We are seeing that broaden out.

We're seeing. a lot of middle income investors as well, but it's top heavy in it in its benefits.

There are some benefits that help you know in terms of accelerated depreciation, some other features like that which are helpful for investors, and I think that's why the market is reacting generally positive to it.

The the investor class and the corporate and the companies that that you know that people invest in.

There is stuff for them there even if even if the benefits might be a little tricky for people at the lower end of the income scale.

OK, Steve, well, we will have to leave it there as always.

Thank you so much for joining me on Jobs Day today.

It falls on a Thursday, and I wish you a happy holiday weekend as well.

Same to you, Remy.

Thank you so much.