4:13pm: Treasury yields pull back
The Dow closed Friday up 288 points, 0.9%, at 33,408, the Nasdaq Composite added 212 points, 1.6%, to 13,431 and the S&P 500 improved 50 points, 1.2%, to 4,309. The small-cap Russell 2000 index gained 17 points, 1%, to 1,748.
The indexes started in the red but steadily climbed over the course of the session following a sizzling jobs report. The US economy added 336,000 new jobs in September, smashing expectations for a rise of 170,000, figures from the US Bureau of Labor Statistics reported.
There was also some relief among US Treasury yields.
“We’re seeing a little bit of a give back in yields from where we were around 4.8%. [With] them pulling back a bit, I think that’s helping the stock market,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. “We’ve had quite a bit of weakness in the market in recent weeks, [and] some oversold conditions.”
12:05pm: Equities shrug off September employment shocker
US stocks were higher in noon trading even as the economy added 336,000 jobs in September, blowing past the 170,000-figure expected by economists.
At midday, the Dow gained 333 points to 33,452, while the S&P 500 added 47 points at 4,305 and the tech-heavy Nasdaq rose 173 points to 13,393.
"The bond market is going to worry that the Fed is going to keep raising rates. ... And the stock market is going to worry about even higher interest rates and the impact that will have on the consumer and on corporate profits," Independent Advisor Alliance chief investment officer Chris Zaccarelli said.
Notable movers included shares of Tesla Inc (NASDAQ:TSLA), which slipped nearly 3% after the EV maker revealed that it had to cut the prices of some Model 3 and Model Y vehicles in the US.
9:41am: Stocks fall, yield on 30-year Treasury tops 5%
US stocks retreated in early trading after the blow-out non-farm payrolls figures raised the spectre of a further interest rate increase by the end of the year.
Shortly after the opening bell, the Dow Jones Industrial Average was down 187.33 points, 0.6%, at 32,932.24, the S&P 500 was down 33.13 points, 0.8%, at 4,225.06 and the Nasdaq Composite was down 113.24 points, 0.9%, at 13,106.60.
The bumper payrolls figure for September was accompanied by upward revisions to the numbers for August and July, although there was good news for the Federal Reserve as growth in average earnings cooled.
"Ultimately, the Fed cares about inflation, not payroll growth per se, so decent job growth coupled with falling inflation will do just fine," said Ian Shepherdson at Pantheon Macroeconomics.
"We think the Fed will not hike again, but it is a much closer call than we would like," he added.
However, the market now puts the chances of an interest rate increase at 50/50 by the end of the year, while expectations of the first rate cut have been pushed back to September 2024, from July.
The figures saw the yield on longer-dated Treasuries hit fresh 16-year highs, with the yield on the 30-year bond topping 5%, up 12 percentage points.
The dollar also soared with the pound down 0.4% to $1.2146.
9:07am: Market sees greater chance of rate hike after strong payrolls
Paul Ashworth chief North American economist at Capital Economics said the “surprisingly strong” increase in non-farm payrolls adds to the evidence on real activity that the economy is holding up well despite the headwind from higher interest rates.
He pointed out alongside the strong figure for September, the gains in the preceding two months were also revised up by a cumulative 119,000, the first upward revisions this year.
“Overall, the report suggests the labour market is enjoying a soft landing,” he added.
If payrolls continue to rise at an elevated pace, then the Fed might be tempted to push on with further rate hikes, he suggested.
“That said, with wage growth and price inflation rapidly fading and the rise in long yields triggering a significant tightening in financial conditions, we still think the Fed is done hiking,” he added.
Neil Wilson at markets.com described the figures as a “mega blowout” with the labour market looking “very hot indeed.”
He pointed out markets now see a 32% chance of a November FOMC interest rate hike, which is "up from 23% prior to the data drop, and a 50% chance of a hike by year-end."
The first rate cut is now priced for September versus July prior to the report, he added.
8:48am: Stock futures drop, dollar rises as payrolls smash forecasts
Stock futures tumbled, bond yeilds jumped and the dollar leapt after figures showed the labour market remains robust, adding fuel to concerns that interest rates will stay inflated for some time to come.
The US economy added 336,000 new jobs in September, smashing expectations for a rise of 170,000, figures from the US Bureau of Labor Statistics reported.
Figures for July were revised up by 79,000, from 157,000 to 236,000, and the change for August was revised up by 40,000, from 187,000 to +227,000.
Woof
U.S NONFARM PAYROLLS (SEP) ACTUAL: 336K VS 187K PREVIOUS; EST 170K pic.twitter.com/Fp4q16dRmi
— Neil Wilson (@marketsneil) October 6, 2023
Job gains occurred in leisure and hospitality; government; health care; professional, scientific, and technical services; and social assistance.
Average hourly earnings rose 0.2% in September compared to August taking the annual increase to 4.2%.
Economists had forecast a monthly increase of 0.3%.
The unemployment rate remained unchanged at 3.8%.
The dollar rose against the pound, euro and the yen, while the yield on the 30-year Treasury closed in on 5%.
7:00am: Stock futures climb ahead of non-farm payrolls
US stock futures have climbed as the market awaits the employment report which includes figures for non-farm payrolls.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.3% higher, while those for the S&P 500 rose 0.3%, and contracts for the Nasdaq 100 futures were up 0.4%.
Nonfarm payrolls are expected to have increased by 170,000 last month, down from 187,000 in August and continuing a trend of sub-200,000 monthly gains.
Craig Erlam, senior market analyst, at Oanda said the release could "set the tone in the markets ahead of next month's Fed meeting."
"While price pressures are ultimately what the Fed is primarily interested in, there is clearly a view on the FOMC that sustainable 2% inflation is not possible without cooling the labour market."
"Time will tell how accurate an assumption that is but in the interim, there will be enormous focus on jobs data for signs of cracks appearing that can offer the central bank the comfort it craves," he said.
Ahead of the figures, bond yields ticked higher with the yield on 10-year US Treasuries rising 0.03 percentage points to 4.74%, edging back towards the 16-year high they touched earlier this week.
Stocks to watch include Levi Strauss & Co (NYSE:LEVI), down 1.8% in pre-market trading after the iconic denim apparel company slashed its full-year sales forecast and fell short of quarterly revenue expectations.
While Exxon Mobil Corp is reported to be close to snapping up the third-largest US shale producer, Pioneer Natural Resources for $60 billion.
Talks were reported to be at an advanced stage, sources close to the matter told Reuters, confirming initial reports from the Wall Street Journal.
A deal is potentially possible within days, the people said.
Pioneer stock rose 11.4% in pre-market deals.