Hot Topic in 5 Minutes | Good or bad, why does the market plunge as soon as it’s released? Understanding the 'mysterious logic' behind the NFP report

Yesterday marked the final trading day of the first half for US equities, which closed out the period with a scorching-hot performance— $Dow Jones Industrial Average (.DJI.US)$ hitting a new closing high, $PHLX Semiconductor Index (.SOX.US)$ up over 100% for the first half of the year, $SanDisk (SNDK.US)$ and surging 800% in just six months, as hot sectors like AI computing power, optical communications, and CPUs all exploded. But after the euphoria, an even bigger test looms:On Thursday, July 2 at 8:30 p.m. ET, the US June nonfarm payrolls (NFP) report will be released early.。

For many fellow investors newly diving into US stocks,the term 'NFP' often carries an inexplicable sense of dread—as if every time it drops, the market throws a tantrum. Is that really the case?Today, we’ll break it all down clearly.

As soon as the NFP is released, does the market collapse?

Why was tomorrow's NFP release moved forward?By convention, the U.S. nonfarm payrolls (NFP) report is released on the first Friday of each month. However, this Friday is the U.S. Independence Day holiday, and U.S. stock markets are closed, so the June NFP report has been moved forward toThursday (July 2)for publication.

Coincidentally,today (Wednesday), Hong Kong stocks are also closed for the Hong Kong Special Administrative Region Establishment Day, meaning both major markets are each closed for one day over this two-day period. Liquidity is already thin, potentially amplifying the impact of the NFP release.

The current market consensus expects around 114,000 new nonfarm payroll jobs added in June, with the unemployment rate holding steady at 4.3%. However, White House officials have already offered a 'preview'—Treasury Secretary Bessent stated he 'would not be surprised if the data came in very strong,' and National Economic Council Director Hassett also noted that leading indicators point to another robust employment report. Such remarks alone have already rattled market nerves.

And just under a month ago, on June 5, the May nonfarm payrolls data delivered a 'devastating blow' to global financial markets.

The data showed that May nonfarm payroll employment rose by172,000, nearly double the market expectation of 88,000, while March and April figures were collectively revised upward by 93,000. The three-month average job growth posted its strongest performance in over two years.

That evening, all three major U.S. equity indices plunged sharply: the Dow fell 1.35%, $S&P 500 Index (.SPX.US)$dropped 2.64%, $Nasdaq Composite Index (.IXIC.US)$and tumbled 4.18%,，marking its steepest single-day decline since April 2025; the Philadelphia Semiconductor Index dropped more than 6% in a single day.

More importantly, this report directly reignited rate hike expectations—interest rate futures now fully price in a 25-basis-point Fed rate hike by December, with about a 60% probability of a hike as early as October.

An even earlier 'notable moment' occurred in August 2024—when the July nonfarm payrolls data came in far below expectations, triggering market panic over a potential U.S. economic recession. Combined with a wave of unwinding yen carry trades, this sparked a global 'Black Monday' sell-off, $Nikkei 225 (.N225.JP)$ with a single-day plunge of 12%.One time the data beat expectations; another time it missed expectations—but both ultimately sent markets tumbling.

Why can both 'beating' and 'missing' expectations cause markets to crash?

First, let’s clarify three pieces of industry jargon:

Beat (better than expected): actual data outperforms market expectations

Miss (worse than expected): actual data underperforms market expectations

In line (as expected): Actual data was broadly in line with expectations

Many fellow investors new to US equities may be confused at this point:If the data is good, it’s bad; if it’s bad, it’s also bad—what kind of devilish indicator is this?

The answer lies in the Federal Reserve’s dual mandate—maximum employment and price stability. Although nonfarm payrolls appear to be an employment report, what the market truly watches is the inflation signal embedded within it. The transmission chain works like this:

Strong job gains → tight labor market → businesses must raise wages to attract workers → hourly earnings rise → service sector costs become stickier → inflation proves persistent → the Fed loses justification for rate cuts and may even hike rates

Therefore, when May’s nonfarm payrolls significantly exceeded expectations, the market interpreted it not as "the economy is strong," but as "inflation won’t ease, and rates will stay higher for longer," causing growth stocks—most sensitive to discount rates—to suffer the steepest valuation declines. This is what’s known as"Good news is bad news"。

Conversely,When data misses badly (such as in August 2024), the market doesn’t interpret it as 'rate cuts are coming soon,' but rather as 'the economy is heading into recession,' and panic selling ensues just the same.

One analyst summed it up perfectly:During inflationary cycles, the market fears rates rising instead of falling—the strong nonfarm payroll report is bearish; during periods of recession fears, the market dreads an economic collapse, so a strong nonfarm payroll actually becomes bullish.。The same data point can have completely opposite effects on U.S. equities depending on the phase of the cycle.

As for an 'in-line' print—roughly matching expectations—it typically gives the market temporary relief and usually has little impact on market performance.

Precisely because the transmission mechanism of nonfarm payrolls is multi-layered, retail investors who focus solely on the headline 'jobs added' figure can easily misread the situation.This is exactly…Niuniu Macro Featured DataThis module’s value lies in visualizing the complete chain behind the nonfarm payroll report:

Labor Market Indicators: Nonfarm payrolls, unemployment rate, labor force participation rate, JOLTS job openings, initial and continuing jobless claims—all clearly laid out at a glance.

Inflation side: CPI, PCE, and Core PCE displayed side by side to clearly observe the wage-to-services-price transmission

Policy Side: Implied path from federal funds rate futures and real-time updates on CME FedWatch probabilities for rate hikes or cuts

Nonfarm Payrolls is not an isolated event—it forms a complete feedback loop of 'data → expectations → policy → assets.' Only by understanding this loop can you avoid being led around by any single data point.

Is Nonfarm Payrolls really that scary? — Once you understand it, you won’t panic.

Nonfarm Payrolls is released once a month—12 times a year—but only a handful actually trigger significant market moves. Often, the data aligns closely with expectations, leading to muted market reactions; sometimes, even if the data deviates, market focus is dominated by other key drivers (earnings reports, geopolitical events, FOMC meetings), causing Nonfarm Payrolls to fade into the background.

Take the current AI-driven rally as an example: the June 5 Nonfarm Payrolls report did cause a stumble, but U.S. equities quickly recovered and hit new highs afterward. Hot sectors like AI compute, optical communications, memory, and quantum computing staged strong comebacks: Western Digital surged 857% in the first half of the year; $Micron Technology (MU.US)$ up more than 300% in the first half of the year; $Advanced Micro Devices (AMD.US)$ 、 $Intel (INTC.US)$ and other CPU-related stocks have also posted substantial gains year-to-date.

What does this tell us? Nonfarm Payrolls can create short-term volatility, but it cannot reverse structural trends. When mid-term fundamentals—such as AI capital expenditure, semiconductor cycles, and memory price increases—are strong enough, a single Nonfarm Payrolls shock often presents just a buying opportunity.

Looking back at the sharp sell-off on June 5,the real cause was actually a confluence of multiple factors:

Valuation side: AI-related stocks had surged significantly in the first half of the year, with the Philadelphia Semiconductor Index briefly surpassing its all-time high, making a technical correction overdue.

Sentiment side: At the beginning of the year, markets had heavily bet on 'rate cuts within the year,' leading to overcrowded positions; once expectations reversed, a stampede became inevitable.

Narrative side: Kevin Warsh, the newly appointed Fed Chair, was set to preside over the June FOMC meeting, and markets were already nervous about his hawkish leanings.

Similarly, the August 2024 plunge also stemmed from highly concentrated market positioning (at that time, the 'Magnificent Seven' U.S. megacap tech stocks $NVIDIA (NVDA.US)$, now memory/storage stocks), along with overheated leveraged trading—factors strikingly similar to those seen earlier.

So how should we handle the monthly nonfarm payrolls report at the beginning of each month? NiuNiu has two suggestions for fellow investors:

First, look at the forecast before looking at the actual data.The impact of the nonfarm payrolls report doesn’t depend on the absolute number, but on its deviation from expectations. For example, a gain of 150,000 jobs is a miss if the forecast was 200,000, but it’s a beat if the forecast was only 100,000.NiuNiu’s nonfarm payrolls coverage will display the consensus forecast side by side, so you can compare them directly.

Second, stay focused on your core thesis and don’t get distracted by market noise. If you’re confident in your AI-themed positions, a short-term pullback triggered by the nonfarm report shouldn’t shake your conviction. If you’re purely trading short-term, it’s safer to reduce exposure ahead of the release and wait for the data to settle before making new decisions—rather than betting on direction blindly.

Tomorrow night’s nonfarm payrolls report could very well be another 'heart-pounding moment.' But remember this:The nonfarm payrolls report is a thermometer, not an engine.It may stir short-term sentiment, but it cannot alter industrial cycles or earnings trends. In the first half of 2026, the Philadelphia Semiconductor Index doubled, Western Digital surged 857%, and Micron rose over 300%—These gains weren’t driven by the nonfarm payrolls report—they came from the AI revolution and the semiconductor pricing cycle.

Once you understand this point, you'll realize:The non-farm payroll data isn't scary—the real danger is not knowing what you're buying.

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