4:05pm Sell-off pares week's gains
By the end of the trading day Friday, US indices were deep in the red after the latest job report highlightef tight labor conditions despite a slowdown in hiring, which could indicate the Fed will proceed with aggressive interest rate hikes.
At the close, the Dow Jones fell by 2.1% at 29,297 points, while S&P 500 had fallen by 2.8% at 3,640 points, and the Nasdaq Composite lost 3.8% at 10,652.
12.05pm: Dow drops almost 500 points
US indices saw equities drop for a second day, as a healthy set of US job numbers dashed hopes of tempering the Federal Reserve’s hawkishness.
At midday, the S&P 500 was down by 2.1% at 3,662, while the Nasdaq Composite was down by 3% at 10,735 and the Dow Jones fell by 1.7% at 29,419 points.
Chris Beauchamp, chief market analyst at online trading platform IG, said stocks dropped noticeably after the latest non-farm payroll numbers were announced today.
“Those hoping for a Fed pivot have been sorely disappointed with today’s job numbers, which have confirmed that US economy continues to rumble along quite well," Beauchamp wrote in a report. "The latest bear market bounce has now begun to wilt as investors wearily return to expectations of at least 125bps of tightening by the end of the year, with more to come in 2023."
By sector, leisure and hospitality led the gains with an increase of 83,000 jobs, an increase that still left the industry 1.1 million jobs short of its pre-pandemic levels in February 2020. The overall unemployment rate declined despite efforts by the Federal Reserve to slow the economy, the US Labor Department reported.
Beauchamp wrote that investors have reverted to buying the dollar and selling stocks.
“Even the impending commencement of earnings season offers little hope, given how weak performance here has been,” he wrote.
Beauchamp is expecting the Fed to move a 75bp rate hike at its November 1 and 2 meeting, especially if September’s CPI data released on October 13 shows little let up in core inflation.
The major movers at midday included medical device wearables company Dexcom, up by 7.3%, while APA Corp was up by 3% on news it expects to boost US production of oil and gas in the third quarter, higher than its previous outlook.
On the downside, semiconductor maker Advanced Micro Devices came close to a 52-week low, as it slid by over 10% on news third quarter revenue will be less than expected. This was followed by CVS Health Corp, down by 9.2% and ON Semiconductor, down by 7.4%.
9.35am: No Fed pivot seen from jobs data, analyst says
US stocks plunged into the red at the open on Friday as investors weighed up hotter-than-expected jobs data which showed American payrolls grew by 263,000 and the unemployment rate fell to 3.5% in September.
Just after the market opened, the Dow Jones Industrial Average had shed 298 points or 1% at 29,629 points, the S&P 500 was down 47 points or 1.3% at 3,697 points, and the Nasdaq Composite had tumbled 215 points or 1.9% at 10,858 points.
Advanced Micro Devices Inc fell about 7.1% after the semiconductor company reported 3Q sales more than $1 billion below expectations as a build-up of inventory continues to weaken demand for PCs.
Meanwhile, DraftKings Inc surged about 7.5% on reports the sports-betting firm is entering a large partnership with cable company ESPN.
Markets.com market analyst Neil Wilson wrote in a note to clients that today’s non-farm payrolls data would not stop the Fed from hiking interest rates aggressively.
“So far the Fed has barely made any dent on inflation and the labor market remains incredibly robust with unemployment at its pre-pandemic low – you do the math(s),” he wrote.
8.40am: Job growth slowdown
Growth of the US labor market slowed in September, according to new data from the US Bureau of Labor Statistics released this morning.
Total non-farm payrolls employment increased by 263,000 in September, falling from 315,000 in the previous month and coming in above the consensus analyst expectation per Bloomberg of 255,000.
Notable job gains occurred in leisure and hospitality and in health care, the Bureau said.
The unemployment rate edged down to 3.5% or 5.8 million people, returning to its July levels, again falling short of the consensus analyst expectation of 3.7%.
The Bureau noted that Hurricane Ian, which made landfall in Florida on September 28, had no discernable effect on employment and unemployment data for the month.
Just after the release of the jobs data, futures for the three major indexes remained largely unchanged with the Dow Jones Industrial Average trading up 0.2% in pre-market trading, the S&P 500 flat, and the Nasdaq Composite trading down 0.1%.
6.30am: Caution reigns
US stocks are expected to open mixed on Friday amid the focus on the crucial non-farm payrolls data for September which will shed light on the Federal Reserve’s path for interest rates.
A softer-than-expected outcome will likely help stock prices higher as rate setters may have to consider slowing the pace of interest rate increases as they attempt to rein in inflation.
Futures for the Dow Jones Industrial Average were up 0.2% in pre-market trading, while those for the S&P 500 were flat and contracts for the Nasdaq-100 were 0.3% lower.
“The US will announce its latest jobs data in a tense and volatile environment of energy crisis, persistent inflation, Fed members insisting that what they are doing is right, and markets crying that what they are doing is maybe a bit too much,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“Investors are not totally wrong betting that the Fed may have to slow down, and even reverse policy if they go too far. And this is why the jobs data is gaining importance, yet again,” added Ozkardeskaya.
Consensus estimates per Bloomberg point to a 255,000 rise in payrolls in September after a 315,000 increase in the previous month. The data is due at 8.30am ET.
“The most ideal mix would be a softer NFP data compared to previous months, but not too soft either. Because the softer data would mean that the US jobs market is cooling as the Fed wants, but a too soft data would mean that the economy may not be doing fine for a soft landing,” said Ozkardeskaya.
A headline figure of around 200,000 would signal that the jobs market remains robust even if it is starting to cool.
A soft reading will likely spur a bullish kneejerk reaction as investors are increasingly concerned about rapid interest rate hikes while strong data could trigger a further sell-off, as it would fail to keep the aggressive rate setters at bay, said Ozkardeskaya.
The Federal Reserve has delivered three 75 basis point interest rate hikes this year and is expected to keep on raising interest rates as it attempts to tackle runaway inflation, but its moves are also expected to dampen growth.
Meanwhile, recent comments from US rate setters have continued to be hawkish, with Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, quoted as saying that the Fed is "quite a ways away" from pausing its rate hike cycle.
Contact the author at jon.hopkins@proactiveinvestors.com