4.05pm: Dow down in the past five days to end four weeks of gains
US stocks finished the trading week higher as the economy added more jobs than expected in October even as the unemployment rate rose to 3.7%.
At the close, the Dow rose 402 points to 32,403, while the S&P 500 added 51 points at 3,771 and the tech-heavy Nasdaq gained 132 points to 10,475.
Notable movers included Block, Inc, which climbed more than 12% after the mobile payment company reported better-than-expected 3Q financial results.
12.10pm: Dow gives up 600 point gain
The US indices reversed into negative territory at midday, suggesting the markets were weighing October’s non-farm payroll numbers against layoffs in the tech industry.
At midday, the S&P 500 was down by 0.2% at 3,717, the Nasdaq Composite was down by 0.4% at 10,305, while the Dow Jones was running flat by at 32,015 points.
The US saw 261,000 non-farm jobs added in October, well above the forecast 205,000 and down slightly from 288,000 in September.
However, Amazon said it is pausing corporate hiring, Apple will only hire for research and development, and Twitter was expected to layoff around 3,700 employees in the wake of Elon Musk’s purchase of the social media giant.
Fiona Cincotta, a market analyst with StoneX, said the US unemployment rate ticked higher to 3.7%, up from 3.5%.
“Interestingly the participation rate fell slightly to 92.7%, suggesting that higher inflation, the cost-of-living crisis, and higher wages still aren’t pulling workers back into the labour market,” Cincotta wrote in a report, adding that Wall Street doesn’t fear the labour market data will prompt large interest rate hikes by the Fed.
“This could be because Fed Powell was so firm in his hawkish stance earlier in the week,” Cincotta wrote, adding that expectations were also rising because China is moving toward exiting its COVID strategy.
However, she noted that the US dollar is falling after the stronger jobs data is being offset by a tick higher in the unemployment rate.
9.35am: Investors weigh up employment figures
US stocks opened higher after initially paring their gains in pre-market trading following the release of hotter than expected jobs data for October at 8.30am Eastern this morning.
Shortly after the market opened, the Dow Jones Industrial Average had added 340 points or 1.1% at 32,341 points, the S&P 500 was up 51 points or 1.4% at 3,771 points, and the Nasdaq Composite had gained 148 points or 1.4% at 10,491 points.
ADSS global head of strategy and trading services Srijan Katyal said, with 261,000 new jobs added last month, the labor market was still positive despite the slight month-on-month slowdown.
“In particular, private payrolls increased more than expected in October, providing greater evidence of a resilient jobs market," Katyal said.
“However, the story doesn’t end there – with tech firms moving towards hiring freezes and some going as far as job cuts, the next few months may look challenging.”
Katyal noted that rate-sensitive industries had dominated job stagnation and shedding following the Fed’s fourth consecutive hike of 75 bps. “Job growth will likely slow across the board as the Fed continues its aggressive monetary policy tightening,” Katyal said.
8.40am: October jobs reading exceeds expectations
The US labor market remains strong, with total nonfarm payroll employment increasing by 261,000 in October, far exceeding the consensus analyst expectation per Bloomberg of 195,000.
According to the Bureau of Labor Statistics, notable job gains occurred in health care, professional and technical services, and manufacturing.
The unemployment rate increased by 0.2% to 3.7% in October, compared to 3.6% expected.
Stock futures pared gains made earlier in the day, with futures for the Dow Jones Industrial Average up 0.3%, the S&P 500 up 0.6% and the Nasdaq Composite up 0.6% in pre-market trading.
6.30am: Keep hard hats handy
US stocks were expected to start cautiously higher on Friday as traders await the latest, always volatile, non-farm payrolls report, recovering after having extended falls in the previous session after mixed signals Wednesday from the Federal Reserve on future interest rate rises.
Futures for the Dow Jones Industrial Average were up 0.5% in pre-market trading on Friday, while contracts for the S&P 500 and the Nasdaq-100 were both 0.7% higher. On Thursday, the Dow Jones shed 0.5%, while the S&P 500 fell 1.1% and the Nasdaq Composite dropped 1.7%.
Michael Hewson, chief market analyst at CMC Markets UK commented: "It was another tough day for European and US markets yesterday in the wake of concerns that the Federal Reserve’s aggressive stance on inflation will drive the global economy into recession, as the soaring US dollar exports an inflationary shock across the world. (Although) Asia markets have managed to stabilise somewhat with Chinese markets surging on more unsubstantiated reports that the Chinese government is looking at a reopening strategy."
In light of the negative market reaction to this week's Fed meeting and governor Jay Powell's press conference, in particular, the focus is now set to return to economic fundamentals, with the October US non-farm payrolls report due at 8.30am ET today, as well as next week’s US CPI inflation report.
Hewson said: "The Federal Reserve continues to see the labour market as particularly tight, especially when looking at the fairly low participation rate, and any weakness here in the coming months could take some of the heat out of the recent rise in yields and surge in the US dollar.
"After Wednesday the market appears to think the Federal Reserve is on a mission and won’t stop until something snaps. The fear is that it might be the global economy if they continue to hike without any regard for the effect the soaring US dollar is having on the rest of the world.
"The very low unemployment rate is perhaps one of the reasons why the US labour market has managed to hold up well despite concerns over slowing consumer spending and increased costs on the part of some US businesses."
Hewson noted that US weekly jobless claims numbers have continued to decline from the highs of around 260,000 seen in the summer, despite rising evidence that companies are starting to shed staff in large numbers. So far these job losses do not appear to be showing up in the headline numbers, while the October ADP private payrolls report showed a big jump of 239,000 earlier this week, he added.
"The September payrolls numbers were decent, coming in at 263k, while the unemployment rate fell to 3.5%, although that was largely down to a similar drop in the participation rate to 62.3% from 62.4%. This continues to be a puzzle given the continued rising cost of living and the fact it is 1% below the levels it was pre-pandemic, when it was at 63.4%," Hewson said.
Expectations are for October jobs growth of 195,000 which would be the lowest number this year, along with the unemployment rate ticking back up to 3.6%.
Contact the author at jon.hopkins@proactiveinvestors.com