US futures are on the rise today, driven by technology stocks. The decline we saw yesterday might be a short-term issue or a reaction to signals from the bond market. US 30-year bond yields hit 5% but have now eased to 4.97%. Investors are waiting for Friday’s non-farm payroll report to understand the bond market’s next steps. At the moment, US stocks appear ready to bounce back. S&P 500 futures are up by 0.5%, Nasdaq futures have risen by 0.7%, and Dow futures are steady. Trading has just begun on Wall Street, and the JOLTS job openings report is yet to come. Tech futures are leading this recovery, but the bond market remains the key factor in market sentiment. The 30-year yield nearing 5% serves as a warning signal for the value of stocks, particularly those with high growth potential. This creates a tense atmosphere where any rally in stocks feels fragile. Today’s JOLTS report for July shows 8.7 million job openings, which suggests a slight cooling in the job market. This figure is slightly below the expected 8.8 million and supports the idea that the Fed’s previous rate hikes are having an effect. Nonetheless, this single data point doesn’t erase worries about ongoing inflation. All eyes are now on Friday’s jobs report, which is expected to reveal that around 175,000 jobs were added in August. The CBOE Volatility Index (VIX) is currently high near 17, indicating that traders are prepared for a significant market shift after the report. This heightened volatility makes it expensive to hold bets on market direction as we approach the announcement. A similar situation occurred in the fall of 2023, when a rapid rise in bond yields led to a nearly 10% drop in the Nasdaq 100. This recent experience serves as a reminder of how quickly market sentiment can turn against tech stocks when long-term rates rise. Today’s market bounce appears cautious, likely keeping this lesson in mind. For those considering trading this rebound, using defined-risk strategies like vertical call spreads on the QQQ ETF is a smart choice. This strategy allows for participation in a potential short-term rally leading up to Friday while limiting losses if the jobs data comes in strong and drives bond yields up again. Buying naked calls now carries too much risk given the uncertain economic climate. On the other hand, traders who think yesterday’s dip marks the start of a bigger decline might consider buying protective puts on the SPY. If job growth exceeds 225,000, yields could rise sharply, dragging down stock prices. This strategy could be useful, as a strong job market increases the possibility of another rate hike from the Fed before the end of the year.

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