Traders are bracing for the release of January’s jobs report on Friday, which could inject some more volatility into an already jittery market. Economists polled by Dow Jones expect the Bureau of Labor Statistics to report a gain of 169,000 jobs for last month. The unemployment rate is expected to remain steady at 4.1%. The latest employment data comes as investors grapple with global trade concerns, which could postpone rate cuts from the Federal Reserve if tariffs on imports from countries such as China, Mexico and Canada translate into an uptick in inflation. Against this backdrop, traders at JPMorgan broke down how they expect the market to react to the report, depending on how many jobs are added. Here are the five scenarios: More than 230,000 jobs added (5% chance): The S & P 500 would fall between 0.5% and 1% under this scenario. “This is the type of print that would be worrisome to the Fed and the bond market, and the reaction would likely remove the 2x rate cuts currently priced into the market; and, depending on the strength of the print, could increase bets that the Fed would have to hike at some point this year as the economy would be poised to accelerate well beyond 3% real GDP growth,” the traders said. Between 190,000 and 230,000 jobs added (25% chance): The S & P 500 would gain between 0.25% and 1.25% under this outcome, according to JPMorgan. Traders said that, “given the growth fears induced by Trade War 2.0, this would assuage some of those concerns and give investors a higher base, of economic growth, to consider the potential impact.” Between 150,000 and 190,000 jobs added (40% chance): “The second best outcome for bulls despite this range including a cooler than expected print, which would still show enough job growth to keep the U.S. growing at least at trend-levels,” the traders said. The S & P 500 would gain between 0.25% and 0.75%. Between 110,000 and 150,000 jobs added (25% chance): This outcome would put pressure on stocks, sending the S & P 500 down 0.5% to 1.25%. “The risk here is that the labor market is cooling faster than anticipated and that will take spending with it,” JPMorgan traders said. Less than 110,000 jobs added (5% chance): The S & P 500 would lose between 1.25% and 1.5%, per JPMorgan. “Adverse weather aside, this type of print would suggest that the uncertainty surrounding global trade is filtering into the real (U.S.) economy more quickly than expected,” the traders said.
