Investing.com - U.S. nonfarm payrolls fell 23,000 in July, badly missing the Reuters consensus forecast of +80,000 and triggering a broad repricing of Federal Reserve policy expectations heading into Monday's session.

The shock report, released Friday, immediately dragged the probability of a Fed rate hike in September to 44% from 57% beforehand, according to Reuters. The Fed held its benchmark rate at 3.50%-3.75% at its July meeting, with three of twelve policymakers already dissenting in favor of an immediate hike. The July miss adds fresh ammunition to the dovish camp, though the policy picture remains far from settled.

The headline unemployment rate edged down to 4.1% from 4.2%, but the improvement came for troubling reasons: 264,000 people exited the labor force, pushing the participation rate to a near five-and-a-half-year low of 61.4%. May and June payrolls were also revised down by a combined 103,000, deepening the picture of a softening jobs market. "This is the third summer in a row that we have seen unexpected weakness in the labor market," Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets, told Reuters. "Policymakers broadly see the labor market as stable."

Wall Street closed at records on Friday after digesting the data, and futures extended those gains ahead of Monday's open, with S&P 500 futures up 0.1% and Nasdaq futures firming 0.3% as of early Monday. The S&P 500's year-to-date gain stood at more than 13% as of Friday's close. Europe's STOXX 600 also ended Friday at an all-time high, with the soft U.S. jobs print reducing fears of a near-term Fed move.

Asian equities tracked Wall Street's momentum into Monday's session. Japan's Nikkei rose 2.0%, South Korea's Kospi added 0.8%, and the MSCI Asia-Pacific ex-Japan index edged up 0.7%, according to Reuters. The one exception was China's CSI 300, which slid 0.7% after July consumer and producer price inflation both came in below forecasts, underscoring soft domestic demand.

JPMorgan raised its 2026 S&P 500 EPS estimate to $365, representing 35% annual growth based on the firm's projections, and lifted its price target on the index to 8,000 from 7,800. Bank of America noted that with roughly 90% of S&P 500 companies having reported, earnings were up 30% year-on-year excluding Alphabet and Amazon investment gains, with a 76% beat rate matching the strongest since 2021.

Oil markets are being pulled in a different direction. Brent crude added 0.6% to $84.04 a barrel in early Monday trade, and WTI rose 0.5% to $78.56, as the Strait of Hormuz standoff kept shipping to a trickle. Iran said Sunday that a deal with Oman defining new shipping lanes was in its final stages, but reiterated the waterway would only fully reopen once the United States met additional conditions, Reuters reported. Iran is seeking transit fees of 5% to 7% of cargo value; Oman is discussing roughly 3%; Washington wants no fees. The dispute matters enormously because roughly a fifth of global oil and LNG normally flows through the strait, which has been largely closed for six months following a U.S.-Israeli strike on Iran in late February. Brent had logged a weekly loss of more than 8% the prior week after deal hopes briefly flared, before recovering as fresh uncertainty took hold.

Gold held near a seven-week high, with spot prices up 0.1% at $4,345.09 per ounce in Monday's early Asian session. "Gold prices continue to benefit from last week's positive momentum, following the disappointing U.S. jobs report and the resulting reduction in expectations of further Fed rate hikes," Ricardo Evangelista, senior analyst at ActivTrades, told Reuters. Silver rose 0.9% to $64.14 in the same session.

The next major market test arrives Wednesday, August 12, when the U.S. July Consumer Price Index is due. Reuters consensus puts the reading at +3.4% year-on-year. Michael Feroli, chief U.S. economist at JPMorgan, told Reuters that the firm's forecast for core CPI of 0.22% "is probably not quite firm enough to prompt a hike from the Fed at the September meeting, though repeated prints closer to 0.3% could do it." He added that a potential rebound in core goods prices, after two consecutive monthly declines, is a key variable to watch. An upside CPI surprise could quickly revive the rate-hike bets the jobs report just deflated; a miss would likely extend the rally in gold and Treasuries and further cement the case for an extended pause. Thursday brings the July Producer Price Index and retail sales data, providing a secondary read on inflation and consumer demand before September's Fed meeting comes into clearer focus.