After Nonfarm Payrolls, CPI Awaits: Will the Macro Data Maelstrom Continue to Rattle Wall Street?

A report from Cailian Press on September 8 highlights that with a Federal Reserve rate cut in September now largely anticipated, options traders expect U.S. equity markets to hold near current highs ahead of Thursday’s Consumer Price Index release. Yet if those inflation figures surprise on the upside, this prevailing consensus could prove precarious.

The rationale underpinning a September 16–17 rate reduction is straightforward: stalled job growth has raised concerns that the economy requires fresh stimulus. Last Friday’s August employment report fell short of expectations, and the unemployment rate climbed to its highest level since 2021, further cementing investor conviction that Fed Funds will be trimmed by 25 basis points next week—and with an 8 percent chance of a more aggressive 50 basis‐point move.

Equity markets edged lower on that data release, as worries over waning payroll gains were overshadowed by hopes of imminent rate relief. Although the VIX volatility index ticked higher, it remained beneath the 20 threshold that it has largely held since June.

Looking toward Thursday’s CPI announcement, options‐market metrics compiled by Piper Sandler & Co. indicate traders are pricing in only about 0.7 percent of one‐day S&P 500 movement—well below the 1 percent average realized volatility of the past year.

However, these subdued expectations carry significant risk if inflation rebounds. “The current environment is as precarious as navigating a tightrope,” warns Eric Teal, Chief Investment Officer at Comerica Wealth Management. “Either an exceptionally dovish or hawkish data surprise could overturn market forecasts.”

With trade tensions, mass deportations, and government downsizing contributing to cost pressures, the threat of persistently elevated inflation remains very real—and could derail the aggressive rate‐cut path traders have baked in for 2025. Sameer Samana, Head of Global Equities and Real Assets at Wells Fargo Investment Institute, cautions that any delay or reduction in the expected pace of cuts would likely amplify market turbulence.

Despite an appearance of calm in volatility metrics, institutional activity suggests that macroeconomic releases continue to spark abrupt swings. Data from Asym 500 reveals that over the past three months, S&P 500 volatility on CPI days, nonfarm payroll announcements, and Fed rate‐decision dates has been nearly 50 percent higher than on routine trading sessions.

Brian Madden, Chief Investment Officer at First Avenue Investment Counsel, observes that today’s markets are teeming with so-called “macro tourists”—short‐horizon traders who chase spikes around data releases such as employment figures and consumer prices.

With investors fully pricing a September rate cut and anticipating 142 basis points of easing over the next year, any signs of stubborn inflation are poised to force a rapid unwinding of dovish wagers, potentially triggering steep equity repricing.

Wall Street strategists are already bracing for an uptick in inflation readings. Consensus forecasts call for August core CPI to rise 0.3 percent month-on-month and 3.1 percent year-on-year—well above the Fed’s 2 percent target and matching July’s pace.

“Macro factors are commanding greater attention,” says Sadiq Adatia, Chief Investment Officer at BMO Global Asset Management, which oversees CAD 226 billion. “Long-term investors want genuine economic signals, not noise.”

Meanwhile, an intriguing divergence is unfolding between equity and bond‐market volatility. Since the S&P 500’s more than 10 percent gain from Memorial Day to Labor Day—the third-best summer stretch in nearly 40 years—the VIX has sat near its lowest annual levels, while the ICE BofA MOVE Index jumped 10 points over two days last week, marking its largest surge since April’s tariff upheaval.

This gap has pushed the ratio of equity to bond volatility to its lowest point since February, underscoring that fixed‐income investors are bracing for greater turbulence even as equity volatility appears muted.

“In periods of heightened policy uncertainty, markets naturally react more strongly to economic data,” explains Mandy Xu, Head of Derivatives Market Intelligence at Cboe Global Markets. “Although a September rate cut is almost certain, fresh data could reshape expectations for the timing and magnitude of future easing.”