The US employment report gave stock buyers something to cheer about on Friday. Payroll growth missed expectations, earlier months were revised lower and wage growth slowed. The initial reaction was lower Treasury yields, a weaker dollar and higher stocks as traders reduced expectations for another October Fed hike.
However, the bond market did not hold that move. Yields reversed higher and ended above Thursday’s levels. Stocks were more successful in holding gains, with the Nasdaq 100 closing at a new record. Nvidia and the Nasdaq Composite reached new all-time intraday highs, but neither finished at a record closing level.
Dollar finishes mostly lower
The USD ended lower against most major currencies despite the recovery in Treasury yields. The Australian dollar led the gains against the greenback, followed by the British pound and Swiss franc.
The Canadian dollar was the exception. USDCAD finished higher as lower oil prices provided a less supportive backdrop for the CAD.
The late-session levels showed:
EURUSD: 1.1257, USD -0.14%.
USDJPY: 157.82, USD −0.16%.
GBPUSD: 1.3244, USD -0.34%.
USDCHF: 0.8283, USD −0.29%.
USDCAD: 1.4251, USD +0.23%.
AUDUSD: 0.6958, USD -0.42%.
NZDUSD: 0.5615, USD -0.21%.
USDJPY illustrated the changing tone. The pair fell to 156.97 during the session but recovered toward 157.82 as yields moved back higher. Dollar sellers had their shot after the data, but could not hold the full decline.
Treasury yields reverse the post-jobs decline
The softer employment report initially supported Treasury buying. However, that buying faded, leaving yields higher across the curve
2-year yield: 4.8414%, +5.44 basis points.
5-year yield: 5.0733%, +6.83 basis points.
10-year yield: 5.2939%, +5.99 basis points.
30-year yield: 5.6448%, +4.18 basis points.
The 10-year yield was back near 5.30% after trading toward 5.17% immediately following the report.
That is an important distinction for traders. The employment data reduced the immediate pressure for further tightening, but the price action showed that it was not enough to sustain a bond rally. Inflation and the broader interest-rate outlook remain concerns.
US stocks close higher; Nasdaq 100 sets a record
All the major US indices finished higher, with the Nasdaq Composite leading the percentage gains.
Dow industrial average: 51,182.11, +250.00 points or +0.49%.
S&P 500: 7,722.85, +56.39 points or +0.74%.
Nasdaq Composite: 27,190.86, +319.27 points or +1.19%.
Russell 2000: 2,832.90, +26.27 points or +0.94%.
Nasdaq 100: 30,807.93, +306.37 points or +1.00%, a new record close.
The Nasdaq Composite reached a new intraday high but finished below its previous record closing level near 27,244. The Nasdaq 100 held enough of its advance to secure a new all-time closing high.
Technology leads, but some record attempts fall short
Technology was a clear source of strength, with both Nasdaq indices outperforming the Dow and S&P 500. Nvidia also traded to a new all-time intraday high, although it pulled back and finished below its previous record close.
The softer jobs and wage numbers helped ease concerns about additional Fed restraint. Nevertheless, the recovery in yields created a less favorable backdrop later in the session.
Small caps participated as well, with the Russell 2000 gaining 0.94%. The buying extended beyond the largest technology names, even as some of the record attempts fell short at the close.
European stocks rebound Friday, finish lower for the week
European equities closed higher on Friday, but the gains did not erase the weekly losses.
German DAX: 25,222.05, +282.69 points or +1.13%. For the week, −0.73%.
France CAC: 7,897.20, +61.88 points or +0.79%. For the week, −2.24%.
UK FTSE 100: 10,461.94, +33.68 points or +0.32%. For the week, −2.18%.
Spain Ibex: 19,085.31, +80.01 points or +0.42%. For the week, −3.12%.
Italy FTSE MIB: 50,483.22, +245.36 points or +0.49%. For the week, −2.67%.
European benchmark 10-year yields declined across the board on Friday. The weekly picture was more mixed: Germany’s yield fell 14.6 basis points, the UK’s fell 6.8 basis points and Spain’s declined 1.2 basis points. French and Italian yields rose 2.7 and 2.2 basis points, respectively, widening their spreads versus Germany.
Employment growth slows; wages also disappoint
The September jobs report was soft across several key measures:
Nonfarm payrolls: +29,000 versus +90,000 expected.
August payrolls: Revised to +133,000 from +162,000.
Combined revisions to July and August: −60,000.
Unemployment rate: 4.2% versus 4.1% expected and previously.
Average hourly earnings: +0.1% for the month versus +0.3% expected.
Annual wage growth: 3.0% versus 3.2% expected.
Private payrolls: +46,000.
Government payrolls: −17,000.
Hiring was concentrated. Private education and health services added 20,000 jobs, construction added 11,000 and manufacturing added 9,000. Information, financial activities, and professional and business services all lost jobs.
Over July–September, payroll growth averaged approximately 51,000 per month. Education and health services, construction and manufacturing together added more jobs than the overall payroll increase, with weakness elsewhere pulling down the total.
There were some offsets. Household employment rose 406,000, while the labor force expanded by 485,000. Participation increased to 61.8%, helping explain the rise in unemployment. Average weekly hours held at 34.4, offering little evidence of aggressive cuts to working hours.
The immediate market reaction pushed October hike probabilities toward 15%–16%. However, those were post-release readings, and the later rebound in yields showed that the broader rate debate remained open.
Goolsbee keeps the focus on inflation
Chicago Fed President Austan Goolsbee described the labor market as steady and said inflation was the more pressing part of the Fed’s mandate. He left both a hike and a pause available, while looking for evidence that inflation is moving toward 2%.
For traders, the message is that one softer employment report does not settle the policy outlook. Slower wages are encouraging, but policymakers still want progress on inflation.
Oil recovers after stockpile headlines push prices lower
Oil fell sharply earlier after announcements of European crude and diesel stockpile releases. French President Emmanuel Macron outlined releases over four months, with G7 leaders confirming up to 100 million barrels. President Trump also said European diesel releases would begin immediately.
However, sellers could not sustain the move below the $88.72 floor. The price recovered much of its earlier decline, with the late-session WTI futures snapshot showing $91.41, down $1.46 or 1.57%.
Additional supply can ease near-term price pressure, but the rebound showed that sellers could not maintain control at the lows. Middle East developments and the broader supply outlook remain important for both energy prices and inflation expectations.
Gold and silver decline despite the weaker dollar
Precious metals failed to benefit sufficiently from the broadly weaker dollar:
Spot gold: $4,142.55, −$34.84 or −0.83%.
Silver: $60.509, −$0.4395 or −0.72%.
The recovery in Treasury yields was a headwind for gold. Higher yields increase the opportunity cost of holding a metal that pays no interest, helping explain why gold struggled despite the dollar’s decline.
Silver also moved lower, while copper gained 0.69%, highlighting the different influences across the metals.
Bitcoin does not follow stocks higher
Bitcoin traded near $84,166, down $687 or 0.81% near the end of day.
The gains in equities and weaker dollar did not translate into sustained buying in Bitcoin (click here for a technical look). The late rise in yields provided a less supportive backdrop, but Friday’s main observation was straightforward: stock-market strength did not carry through to crypto.
Next week: Be aware. Be prepared.
Next week’s calendar features US ISM services on Monday, Fed minutes on Wednesday, ECB meeting accounts on Thursday, and Canadian employment and University of Michigan sentiment on Friday. Inflation expectations in the Michigan survey will deserve attention.
Stock buyers head into the weekend with gains and a Nasdaq 100 record close. However, elevated Treasury yields, the retreat from Nvidia’s and the Nasdaq Composite’s intraday records, and oil’s recovery from its lows leave some unfinished business.
The first move after the news gives traders information. Whether that move can hold tells us more. Friday’s bond market was a good reminder of that.
It’s a wrap.
This article was written by Greg Michalowski at investinglive.com.
Source: Investing Live - News
