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Inside Markets — Payroll Preview and VIX

Payroll Preview and VIX

October 3, 2024

Consensus is looking for non-farm payrolls of +140,000 after a similar print last month generated SPX downside of ~1.75%. An inline print between +140,000 and +160,000 tomorrow will likely result in some equity upside. The risk for equities is on a downside print with something in the +110,000 to +140,000 range taking the SPX down 50-150bp. A print below +110,000 would generate a bearish reaction with something under +100,000 delivering downside of ~2-3%. Consensus is also looking for an unchanged Unemployment Rate of 4.2% and unchanged wage growth of +0.3%.

Prolonged periods of subdued volatility result in higher equity multiples. A mostly benign macro environment beginning last November has allowed the CBOE Volatility Index (VIX) to remain at subdued levels (below 20) except for a record intraday spike to 65.7 on August 5 and the four days that followed. Recall the August 5 spike in the VIX followed outsized yen strength that forced the unwinding of a very crowded carry trade. The SPX had already declined more than -3% in the two days that followed the July payrolls miss with the VIX spike adding downside of another ~3.6% before the yen peaked and the Fed promised rate cuts. US macro data that aligns with a growth slowdown/recession would cause another VIX spike that will last longer than a handful of days and generate meaningful multiple contraction.

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