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Good morning. A massive bearish Treasury options bet and further market pullback ahead of today’s jobs data. Here’s what’s moving markets. — [View in browser]( [Bloomberg]( Good morning. A massive bearish Treasury options bet and further market pullback ahead of today’s jobs data. Here’s what’s moving markets. — [Charlotte Hughes-Morgan](. Jobs day The big data drop today is the nonfarm payrolls report, topping off a week of reports on the US labor market. Markets will be watching closely, and Treasuries, the dollar and tech stocks have all seen significant moves heading into it. Data out yesterday showed that companies [ramped up hiring]( in December and wage gains continued to cool, consistent with an outlook for sustained growth and ebbing inflation, while jobless claims came in below estimates. Investors have been [paring](some of their central bank rate cut bets as concern builds that the market has been over-optimistic on the timing of the Fed’s pivot to a more dovish stance. Listen to the Daybreak Podcast for a jobs day preview [here](. Options bet The options market for US Treasuries was abuzz yesterday following the emergence of a [large bearish wager]( that today’s job report will trigger the biggest backup in benchmark yields in more than nine months. The trade targets a surge in US 10-year yields to as high as 4.15% by close of business today, or a jump of about 0.15 percentage points from Thursday’s closing level. That would mark the biggest one-day rise in 10-year yields since late March and a further retrenchment for Treasuries, which have already had a rocky start to 2024 after a two-month rally at the end of last year.  Market jitters Markets continued their [partial retrenchment]( after December’s strong performance ahead of today’s jobs data as that speculation builds that a resilient labor market may delay rate cuts. Sentiment was weakened by a late dip in Wall Street overnight, as US tech stocks posted their longest streak of losses in over a decade. The tech-heavy Nasdaq 100 fell 0.5%, extending losses to a fifth day — its longest slide since December 2022. Ten-year Treasuries also extended declines with the yield rising to over 4%. In European trading this morning, stocks resumed their declines and bond yields edged higher as investors look to the jobs data to gauge the health of the US economy. Credit crunch It’s also a gloomy start to the year for [credit markets](, which have seen hundreds of billions of dollars of value wiped out in one of the worst cross-asset [selloffs](to greet a new year in decades. The combined value of the high-grade and junk market has shrunk by about $240 billion to $13.6 trillion, the lowest since Dec. 13, according to data compiled by Bloomberg. The drop in market value was exacerbated by the rebalancing of bonds underlying the indexes at the end of last month. That said, the bad start has only eaten into a fraction of the gains recorded in the last two months.  In late October, the global credit market’s value stood a trillion dollars below its current level. China conundrum Tearing ourselves away from the jobs data, there’s a spate of news out of China this morning. Chinese shadow banking giant Zhongzhi Enterprise Group has [filed for bankruptcy](, saying it’s insolvent. This follows [criminal investigations]( into the shadow bank’s money management business, which had extended financing to troubled developers and snapped up assets from companies including China Evergrande. Meanwhile, with sentiment towards China’s economy as depressed as it is, the [risk premium]( of Chinese stocks has reached a level that historically leads to spectacular returns according to one indicator. The country’s stock market is sinking to the bottom of the global ranking in the first week of 2024 trading. Further muddying the waters, President Xi Jinping has also been causing some confusion with a [cryptic economic slogan](. What We’ve Been Watching This is what’s caught our eye over the past 24 hours. - A mere billion doesn’t cut it on this [exclusive Florida island]( - China probes EU liquor, sinking shares as the [trade spat worsens]( - Short sellers lost [$195 billion in 2023]( despite wins on regional banks - Blinken heads to [Middle East]( after attacks in the Red Sea and Iran - Tesla [recalls nearly every car]( it’s ever sold in China due to Autopilot risk - Business Insider says Bill Ackman’s wife [plagiarized]( her doctoral thesis - John Authers [questions]( how important the jobs data really is for markets And finally, here's what Kristine’s interested in this morning A pullback in the outlook for Federal Reserve rate cuts that kickstarted this year will likely prove supportive for sustainable gains in stocks and bonds longer term. Traders currently see five quarter-point rate reductions this year, ramping down from as much as the six cuts they saw in the midst of the end-2023 euphoria in most assets. Back then, some naysayers were already [sounding warnings]( for investors hoping that rate cuts would set them up for an extended rally. The early January losses for stocks and bonds validate those concerns to some extent though, as colleagues Cameron Crise and Simon White noted, price action at this point can’t always be trusted as a definitive guide for the rest of the year. What the pullback in both assets and rate-cut bets does accomplish is to take some froth out of the recent rally and put investors closer in line with the Fed’s soft-landing scenario -- as seen in officials’ projection for three 25-basis-point cuts in the dot plot. There’s still room for markets to pare their rate-cut expectations to be fully on the same page as the Fed, especially as we get more evidence that the US labor market remains robust. We're likely to get more on that front today, with the latest jobs report set to show that payrolls and earnings are cooling at a moderate clip. That means the retreat in asset gains will continue for a while yet but once that adjustment is done, stocks and bonds can once again have room to revive gains, even if at a less frenetic pace than last year’s. [Kristine Aquino]( is managing editor for Bloomberg Markets Today. Follow her on X at [@krisaqnews](. Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. Tell us what you want to see in the Five Things newsletter! 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