Equities Rally on Weak Jobs Report, Gold Surges; Geopolitical Tensions Persist

Lead US equities closed higher, with the S&P 500 ETF up 0.59% and the Nasdaq 100 ETF gaining 1.12%, fueled by a weaker-than-expected US jobs report. Gold surged 2.30%, while geopolitical tensions in the Middle East continue to be a focus, with Iran demanding compensation to reopen the Strait of Hormuz. Session narrative US equities saw a strong close, with the S&P 500 ETF rising 0.59% and the Nasdaq 100 ETF up 1.12%. This rally was largely attributed to a surprisingly weak US jobs report, which showed a decline of 23,000 nonfarm payrolls in July, missing expectations for an 86,000 increase. This data fueled hopes for a potential pause in Federal Reserve rate hikes. Gold surged 2.30% on the day, while WTI crude oil gained 1.15%. In geopolitical news, a senior Yemeni source stated that Saudi officers and forces would not be spared from missile and drone strikes. Iranian President Pezeshkian indicated that now is the best time for a deal, as Iran is seen as victorious in the war, but Tehran demands compensation to reopen the Strait of Hormuz. The US military campaign against Iran has also highlighted concerns about America's defense industrial base, with reports of dwindling munitions supplies. Cross-asset check Equity markets closed positively, with the S&P 500 ETF up 0.59%, the Nasdaq 100 ETF gaining 1.12%, and the Russell 2000 ETF advancing 1.15%. Futures for these indices also reflected gains, with S&P futures up 0.58% and Nasdaq futures up 1.18%. The VIX, a measure of market volatility, decreased by 1.65%. In fixed income, the US 10-year yield saw a slight decrease of 0.21%, while long-duration Treasuries (TLT) rose 0.29%. The US Dollar Index (DXY) was up 0.07%. Commodities saw significant moves, with Gold surging 2.33% and Silver up 3.07%. WTI crude oil gained 1.15% and Brent crude rose 1.29%. Copper, however, declined by 1.76%. Themes & continuing stories Geopolitical tensions in the Middle East remain a dominant theme, with Iran's demands for compensation to reopen the Strait of Hormuz and ongoing missile strikes in Yemen. The US military's munitions stockpiles are also a concern amidst the conflict. The US-China AI competition is another significant continuing story, with both nations vying for technological dominance, impacting chipmaker stocks. Expectations around central bank policy, particularly the Federal Reserve's stance on interest rates, are heavily influenced by economic data like the recent jobs report. The market is closely watching how this data will shape future FOMC decisions. What’s ahead The week ahead will bring several key catalysts for the S&P 500, including upcoming economic data and corporate earnings. Inflation data, specifically the US CPI report, will be a major focus, with core CPI expected to rise 0.2% month-over-month. This will be crucial for shaping expectations around the September FOMC meeting. Earnings season continues, with 184 major companies scheduled to report, including Berkshire Hathaway and Cisco. Additionally, the US Treasury plans to auction 125 billion dollars across 3-year, 10-year, and 30-year maturities, which will be closely watched by market participants.