A rollercoaster night? The global market is going through a lot of drama tonight

**Source**: Wall Street Insights

**Author**: Zhang Yaqi

Tonight is destined to be a sleepless night. The confluence of multiple high-impact events may trigger sharp market volatility: the U.S. nonfarm payrolls report will set the tone for the Federal Reserve’s rate path; the Supreme Court is likely to issue a ruling on tariffs, forcing a binary choice between retention and revocation; coupled with the ongoing annual rebalancing of commodity indices, the pricing logic of the bond, stock and commodity markets is poised to undergo multiple reshuffles within hours.

Global investors are holding their breath, bracing for an extremely volatile **"Super Friday"**. Tonight, a flurry of pivotal events—ranging from macroeconomic data and a top judicial verdict to structural adjustments in the commodity market—will unfold in quick succession. These developments are not only likely to shatter the recent market calm but also directly reshape the short-term pricing framework across bonds, stocks and commodities.

First up is the release of the U.S. December nonfarm payrolls report at 21:30 Beijing time on Friday. After weeks of data vacuum caused by the government shutdown, the market is in dire need of this **"reliable reading"** to recalibrate its assessment of economic health. This report will serve as a decisive reference for the Fed ahead of its January policy meeting, directly determining whether the central bank holds rates steady or continues its rate-cutting cycle.

Hot on its heels, market nerves will be on edge as the U.S. Supreme Court is expected to rule on the legality of Trump’s tariffs. A ruling that deems the tariffs unlawful would erode a key revenue stream worth hundreds of billions of dollars for the government, potentially stoking concerns over fiscal deficits and pushing up long-term U.S. Treasury yields. While the Trump administration is expected to pursue alternative legal avenues to reinstate most tariffs, short-term market volatility is unavoidable. Strategists at JPMorgan Chase noted that scrapping the tariffs could **"reignite fiscal worries, lift long-term yields and steepen the yield curve"**.

Meanwhile, the commodity market is facing a **"double whammy"**. In addition to the impending release of the Section 232 tariff investigation results, which could trigger a drastic repricing in the precious metals market, large-scale index rebalancing trades are already underway, subjecting silver and other commodities to unprecedented selling pressure. These shocks come at a critical juncture: the U.S. Treasury market has been mired in a month-long tight range, with the 10-year Treasury yield fluctuating between 4.1% and 4.2%—marking the narrowest monthly trading band since 2020. For traders worldwide, tonight will be a sleepless night, as the confluence of multiple catalysts is likely to amplify market swings to extraordinary levels.

### Nonfarm Payrolls: The "Decisive Factor" for Fed Policy

Bond traders are gearing up for tonight’s volatility, after the 10-year U.S. Treasury yield has been stuck in a tight 4.1%-4.2% range over the past month. Zach Griffiths, Head of Investment Grade and Macro Strategy at CreditSights, commented, **"The lack of economic data over the past few months has left the market complacent—we could see a resurgence in volatility."** With the impact of the government shutdown fading, this report is regarded as the first reliable gauge of economic conditions.

Investors broadly expect the labor market to show signs of stabilization. According to economists surveyed by Bloomberg, nonfarm payrolls are projected to rise by 70,000 in December, following a 64,000 gain in November, while the unemployment rate is forecast to edge down from 4.6% to 4.5%. Currently, market pricing suggests investors see only a 10% probability of a Fed rate cut this month, with the next cut expected in June—one month after Fed Chair Jerome Powell’s term expires.

Gregory Faranello, Head of U.S. Rates Trading and Strategy at AmeriVet Securities, analyzed that a **"very weak"** jobs print—such as flat employment growth—would force the Fed to step in, potentially lifting the odds of a January rate cut to 50%. In this scenario, Treasury yields would fall across the board, with short-dated bonds outperforming longer-dated ones, leading to a steepening of the yield curve.

### Supreme Court Ruling: Binary Choice on Tariff Fate

After digesting the jobs data, market focus will quickly shift to the Supreme Court’s potential tariff ruling. The verdict carries a clear binary outcome: if the tariffs are struck down, equities are poised to benefit while bonds may come under pressure; if the tariffs are upheld, the market reaction will be the opposite.

JPMorgan Chase’s Delta-One desk provided a detailed scenario analysis:

- **Base case (66% probability)**: Tariffs are struck down and immediately replaced. The S&P 500 could rise 0.75%-1% intraday but pare gains later, ending the day up 10-20 basis points.

- **Tariff retention (24% probability)**: The index could drop 30-50 basis points.

- **Most bullish case (9% probability)**: Tariffs are struck down and replaced only after the midterm elections. The index could climb 1.25%-1.5%, with small-cap stocks significantly outperforming large-caps.

Ohsung Kwon, Chief Equity Strategist at Wells Fargo, projected that if the tariffs are ruled unconstitutional, the EBIT of S&P 500 constituent companies could rise by approximately 2.4% in 2026 compared to the previous year. Consumer goods, industrial manufacturing and large banks would be the most obvious beneficiaries, while raw materials and commodity sectors may lag as they lose price protection.

For the bond market, however, the JPMorgan Chase strategy team pointed out that scrapping the tariffs risks **"reigniting fiscal concerns, pushing up long-term yields and steepening the yield curve"**, though the overall impact **"should be fairly limited"** as the Trump administration may turn to other legal means to reinstate most tariffs. The Morgan Stanley team cautioned that investors need to monitor the timing and scale of potential tariff refunds to importers, as this directly affects the demand for Treasury issuance.

Prediction platforms show that traders assign a 24% probability to the court upholding Trump’s tariffs, with only around a 40% chance of an immediate refund of tariff revenues.

### Commodity Market Storm: Double Blow from Section 232 Probe and Index Rebalancing

Beyond the macro drama, the commodity market is facing more complex microstructure shocks. The results of the U.S. Section 232 tariff investigation into critical minerals are expected to be released this Saturday, with the market highly sensitive to the direction of silver, platinum and palladium prices.

According to the research team led by Kenny Hu at Citi, palladium is most likely to face high tariffs (e.g., 50%), which would send U.S. market prices soaring, creating a massive premium over the London market and triggering a short-term rush to ship palladium to the U.S. In contrast, silver is highly likely to be exempt from tariffs. If no tariffs are imposed, metals will flow out of the U.S. to ease spot tightness in London, potentially triggering a correction in silver prices.

More immediate pressure stems from capital flows. The annual rebalancing of the Bloomberg Commodity Index (BCOM) kicked off after the close on January 8. With silver’s weighting set to be sharply reduced, TD Securities and Deutsche Bank expect approximately $7.7 billion worth of silver sell orders to flood the market over the next two weeks—equivalent to 13% of total open interest in COMEX silver futures.

Daniel Ghali, Analyst at TD Securities, warned that amid thin liquidity, this could trigger a **margin call-like sharp repricing**. However, Lina Thomas, Analyst at Goldman Sachs, offered a contrasting view: she argued that as long as tightness in London inventories persists and the U.S. market’s supply-demand mismatch continues, extreme price volatility will endure, and prices may even climb further amid investor enthusiasm. She also cautioned, though, that downside risks will increase significantly once liquidity in London improves.

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