US stock futures took a nosedive Friday after the US jobs report blew by expectations, as investors considered the possibility that it could sway the Federal Reserve’s thinking on whether to hold or hike interest rates.
Futures on the Dow Jones Industrial Average (^DJI) were down 0.7%, or about 200 points, after the major indexes recovered ground on Thursday. S&P 500 (^GSPC) futures plummeted 0.9%, while tech-heavy Nasdaq 100 (^NDX) futures plunged 1.1%.
The September jobs data did not show the signs of cooling in the labor market that were forecast. The US economy added 336,000 jobs in September, almost twice the number expected. That could give the Fed more evidence that the labor market remains strong, making the case for a more restrictive policy for longer.
Friday’s data is the last key payrolls report before the the bank’s next policy meeting.
Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards
The Fed is also watching the bond markets, as Fed official Mary Daly said Thursday that if long-term bond yields remain around current levels, then the Fed may not need to raise interest rates again. The blistering rally in yields continued Friday after the jobs print, with 10 -year U.S. Treasury yields (^TNX) going back up past 4.8%.
The bond sell-off may well continue, given there’s no clear catalyst to stem the bleeding, according to some analysts. It would take a washout in stocks or softening in the economy to prompt a retreat in yields, they believe.
Worries about growth have weighed on oil prices, which are set for their biggest weekly loss since March thanks to a clouded demand outlook. WTI crude oil futures (CL=F) fell below $82 a barrel on Friday, while Brent crude futures (BZ=F) moved down below the key $84 level.
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The US labor market was so back in September
The US labor market added 336,000 jobs in September, nearly double the 170,000 expected by Wall Street economists and a sign the labor market’s resilience may continue to push the Federal Reserve to keep interest rates elevated or even raise rates further.
The unemployment rate in September was unchanged at 3.8% as labor participation remained steady from the prior month. A rise in participation pushed unemployment higher in August.
Wage growth slowed modestly in September, with average hourly earnings rising 4.2% over the prior year, less than the 4.3% that was expected, which would’ve matched the increase seen in August.
In the initial aftermath of this report odds the Fed raises rates next month rose to about 29% from 20% as of Thursday. We’ll keep a close eye on where these odds shake out over the coming weeks, and particularly ahead of inflation data due out next Thursday.
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Stock futures rise with all eyes on US payrolls print
The major US stock indexes were poised to open higher on Friday, as investors waited for the release of the key US monthly jobs report that could set the tone for Federal Reserve policy.
Futures on the S&P 500 (^GSPC) were up 0.24%, while those on the Dow Jones Industrial Average (^DJI) gained 0.22%, or 74 points. Contracts on the tech-heavy Nasdaq 100 stepped 0.28% higher.
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