Financial markets can experience large reactions to the US labour market report. The average move in the S&P 500 in the hours after a jobs report is flat over the past year, however, the highest move to the upside has been 1.1%, back in February, when payrolls grew by 236k. The largest decline has been a drop of 1.5% in September, after payrolls rose by 255k, which caused markets to worry about a slower pace of Fed rate cuts. The market is now expecting a slow pace of rate cuts, thus an upside surprise to NFPs on Friday may not trigger such a large negative reaction in US stocks. Interestingly, US small and mid-cap stocks have had smaller reactions to the NFP report compared to the S&P 500 in the past 12 months. In 8 out of the last 11 reports the Russell 2000 has declined in the hours after a payrolls release. Since the labour market was generally resilient in 2024, this suggests that mid-cap stocks are more sensitive to changes in expectations for Fed rate cuts compared to the blue chip S&P 500 index.
