More Traders Predict a Fed Hike. Don't Bet On It

• ADP reported just 44,000 private sector jobs added in July, the weakest since January and significantly below the 75,000 forecast, with goods-producing sectors shedding 3,000 jobs
• The 10-year Treasury yield has climbed since late June, effectively tightening financial conditions without Fed action and reducing the need for additional rate hikes
• Three analysts recommend buying AI infrastructure stocks following the resolution of forced selling from the $45 billion Situational Awareness fund liquidation, viewing recent weakness as a capitulation bottom

Market Summary: Fed Rate Hike Speculation and AI Buying Opportunity

Key Economic Developments

Minneapolis Fed President Neel Kashkari advocated for rate hikes, citing strong corporate earnings and resilient labor markets. However, July's ADP jobs report contradicted this hawkish stance, showing just 44,000 private-sector jobs added—well below the 75,000 expectation and the weakest reading since January. Goods-producing sectors shed 3,000 jobs, with education and health services accounting for 36,000 of the 47,000 new service positions.

The CME FedWatch Tool currently shows traders pricing in nearly 57% odds of a September rate hike, though analysts remain skeptical.

Fed Policy Outlook

Fed Chair Kevin Warsh's philosophy of responding to durable trends rather than monthly volatility suggests one jobs report won't dramatically shift policy. The 10-year Treasury yield has climbed since late June, effectively tightening financial conditions without Fed intervention. Warsh indicated comfort with markets self-adjusting, stating they're "reacting to real-time events" rather than Fed projections.

Friday's official nonfarm payroll report (forecasted at 80,000 jobs) will be closely watched, though analysts caution against overreacting to single data points.

Investment Implications

Three analysts from different perspectives recommend buying AI infrastructure stocks:

• Technical analyst Jonathan Rose identified the Invesco QQQ ETF's July 29 bottom as significant, with support at 702
• Technology expert Luke Lango issued seven new AI infrastructure "Buy" recommendations, citing removal of forced selling pressure from Leopold Aschenbrenner's $45 billion fund liquidation
• Investor Louis Navellier views the recent selloff as capitulation, typically marking important market lows

All three analysts suggest August could bring strong rebounds, particularly in AI infrastructure plays, presenting a buying opportunity for sidelined investors.