Global investors are homing in on America’s non-farm payrolls report on Friday, which is a key gauge watched by the Federal Reserve in its rate decisions for the world’s largest economy.

A reading on US job openings, known as JOLTS, published overnight trailed estimates and hit the lowest level since 2021. It sparked an immediate reaction in the bond market, pushing the US two-year note’s yield briefly below the 10-year note as traders built up wagers on a super-sized rate reduction this month.

“The markets may not be as nervous as they were a month ago, but they’re still looking for confirmation the economy isn’t cooling off too much,” said Chris Larkin at E*Trade from Morgan Stanley. “So far this week, they haven’t gotten it.”

With the Fed set to begin cutting rates in a few weeks, the main question now is how big the first reduction will be. The monthly US employment data due on Friday will probably determine the answer.

Investors are on the edge of their seats after the release of the jobs report last month stoked growth fears. Fed chief Jerome Powell has made it clear the Fed is now more concerned about risks to the labour market than inflation, and another bad report would bolster the case for an outsize rate cut.

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“Markets seem to see September as a coin flip between 25 and 50 basis points,” said Neil Dutta at Renaissance Macro Research. “I think going 25 bp risks the same market dynamic as skipping the July meeting. It’ll be fine until the next data point makes investors second guess the decision, fuelling bets the Fed is behind the curve. Go 50 when you can, not when you must.”

Treasury 10-year yields declined eight basis points to 3.76 per cent. Swap traders have fully priced in a quarter-point rate cut in September — and a more than 30 per cent chance of a half-point reduction. Over 100 basis points of easing is expected for the remaining three meetings this year.

US stocks gave up earlier gains as AI giant Nvidia plunged again for its worst two-day fall since October 22. Nvidia shares fell 1.7 per cent after the company said it had not been subpoenaed by the US Department of Justice in response to a report by Bloomberg News on Tuesday.

The S&P 500 closed 0.2 per cent lower at 5,520.07 points. The Nasdaq 100 lost 0.3 per cent, while the Dow Jones Industrial Average edged up 0.1 per cent. But that’s much more benign than the previous session, where the S&P 500 plunged 2.1 per cent, the Nasdaq was down 3.3 per cent and the Dow lost 1.5 per cent.

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Verizon Communications fell 3.4 per cent as investors heard it’s in advanced talks to acquire Frontier Communications Parent, according to a person familiar with the negotiations.

Shares of US Steel plunged 17.5 per cent after reports that US President Joe Biden is preparing to block Nippon Steel’s $22 billion takeover of United States Steel.

Wall Street could be heading for a correction if the payrolls data comes in weak on Friday, according to Scott Rubner at Goldman Sachs.

The bank’s clients are already positioning for a negative technical setup for share prices in the second half of September, Rubner wrote, adding that he expects a risk-off move to begin on September 16. “A market correction may start to get traction if payrolls are weak,” he wrote.