Risk ripped higher for a third straight session as falling yields and a soft ADP print let equities claw back the Iran-driven selloff from earlier in the week.
The tape firmed as crude eased off its spike near $90-92, the 10-year backed off two-year highs, and the VIX collapsed toward the 14.5 handle — classic vol-crush behavior ahead of a binary catalyst. Nvidia and Meta led mega-cap tech higher while Broadcom lagged despite beating estimates, a reminder this market is pricing near-perfection into AI capex names. Dell and GitLab posted outsized earnings pops, keeping software breadth constructive even as several S&P sectors lagged the headline advance.
Price closed comfortably above the indicative SPY gamma flip, keeping dealers long-gamma and dampening realized vol into tomorrow's print, but that compression cuts both ways. Volumes were already thinning ahead of the three-day Labor Day weekend, so any surprise at the open Friday gets amplified rather than absorbed.
The risk: Friday's 8:30am ET August payrolls report is the swing factor, and the read is inverted from the usual playbook. After Chair Warsh's hawkish Jackson Hole tone pushed hike odds for the September 16 FOMC toward two-in-three, a hot jobs number reprices yields higher, not lower — good news is bad news again. A print near the roughly 50k consensus trims hike odds and lets this bounce extend into the long weekend; a strong beat sends the 10-year back toward cycle highs and can trip the SPY flip fast on thin, holiday-adjacent liquidity.