Need to Know: There’s a new market dynamic heading into payrolls report, Goldman trading expert says

Economists polled by the Wall Street Journal expect a 190,000 rise in nonfarm payrolls — remember, there will be a boost from returning auto workers — an unchanged jobless rate of 3.9% and a 0.3% rise in average hourly earnings.

John Flood, a managing director at Goldman Sachs who works in its trading business, says there is a “new dynamic” in that the market will dislike extreme results in either direction.

A rise of more than 250,000 would lead to a sell-off in the S&P 500 SPX of at least 0.5%, but so will a gain of fewer than 50,000, he said. The sweet spot would be a rise between 50,000 and 150,000, he says, which would trigger a gain of at least 1%.

That said, there is always the possibility some other element of the jobs report could take the spotlight. It’s “worth noting our best macro people think the unemployment rate is most important slice of Friday’s report.”

The unemployment rate has already risen a half-point from its low. Note that the Sahm Rule recession indicator is when the three-month average of the unemployment rate is at least a half point above its three-month minimum over the last 12 months, and the latest reading is 0.33%.

It would take a particularly large jump in the jobless rate, to 4.3%, to trigger the Sahm Rule with Friday’s report, though it seems like the recession indicator will be triggered early next year.

The market

Japanese stocks JP:NIK fell and the yen USDJPY, -1.49% rose Thursday after comments from Bank of Japan officials helped stir expectations the country could exit its decades-long negative interest-rate policy as early as next week. Apart from that, stock futures ES00, +0.11% NQ00, +0.32% were steady, oil CL.1, +1.11% was right around $70, and the 10-year BX:TMUBMUSD10Y was 4.13%.

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The buzz

Alphabet’s GOOGL, -0.74% Google launched Gemini, a new artificial intelligence model that will be incorporated into its Bard chatbot and its Pixel 8 Pro smartphone.

Advanced Micro Devices AMD, -1.32% rolled out new chips for AI usage, in what may be the first challenge to Nvidia NVDA, -2.28%.

AbbVie ABBV, +1.25% said it’s going to buy Cerevel Therapeutics CERE, +3.77% in an $8.7 billion deal.

GameStop GME, -0.47% missed revenue expectations in the third quarter, as the videogame retailer said it would be able to invest in stocks, managed by new Chairman and CEO Ryan Cohen.

McDonald’s MCD, +0.11% CosMc’s spinoff launches this month.

The economics calendar features jobless claims, and in the afternoon, the consumer credit report.

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Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

The chart

Retail investors are buying stocks — which is unusual for this time of year, according to analysts at Vanda Research. That “has helped smaller cap names outperform big tech, especially those stocks tied to the crypto and the software/AI space,” say the analysts, who identify Marathon Digital MARA, +1.70%, Riot Platforms RIOT, -2.51% and Coinbase Global COIN, -3.97% among the crypto names being purchased, alongside other companies including PDD Holdings PDD, -1.02%, Workday WDAY, -0.16% and Snowflake SNOW, -0.91%.

Random reads

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A woman was sentenced to work at a fast-food restaurant after hurling a burrito bowl at an employee’s face.

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