Analysis: Jobs data strengthens bets on Federal Reserve interest rate hikes, with no widespread flight to safety on Wall Street.

Stronger-than-expected August U.S. employment data has reignited market bets on a potential Federal Reserve interest rate hike, though Wall Street’s risk assets have not seen notable panic. The data, which showed growing resilience in the labor market, led traders to raise their expectations for a rate hike at the Fed’s September 16 meeting. U.S. Treasuries were sold off, the U.S. dollar strengthened, and the S&P 500 index fell on Friday but still notched a weekly gain. Unlike past rate hikes that often triggered capital flight, this round of bond market adjustment has not spread to other risk assets. Credit spreads remain at low levels, and pressure in corporate bond and equity index markets is limited. JPMorgan noted that liquidity in U.S. Treasuries has deteriorated significantly, but similar stress has not emerged in corporate bond ETF and stock index futures markets. The market’s resilience stems mainly from economic growth and corporate earnings, particularly as AI investments continue to drive tech firms to maintain large-scale capital expenditures. Analysts pointed out that the market is currently more focused on whether yields will rise rapidly rather than the single employment data itself. The market’s next focus will shift to inflation data and whether the Fed will reconsider its rate hike path due to inflationary pressures. If yields rise further and rapidly, it may force investors to reduce their risk exposure.