Major averages slumped and yields rose on Friday after September payrolls rose a little more than expected and unemployment fell with a decline in labor force participation.
The Dow (DJI) is -1.7%, the S&P 500 (SP500) is -2.1%, and the Nasdaq Composite (COMP.IND) is -2.7%.
The 10-year Treasury yield (US10Y) is up 8 basis points to 3.90% and the 2-year yield (US2Y) is up 6 basis point to 4.31%.
“A 263,000 September jobs gains was slightly above market expectations while the unemployment rate dipped sharply to 3.5% versus a 3.7% forecast,” SA contributor Mike Zaccardi said. “Coming in-line with consensus estimates were month-on-month and year-on-year hourly earnings figures. The all-important labor force participation rate came in light at 62.3%.”
The drop in participation and the jobless rate will likely keep the Fed on track for a hike of 75 basis points at the next meeting. Fed funds futures are pricing in a 74% chance of that.
“Overall, I see the data as being on the ‘hot’ side, suggesting the labor market remains tight,” Zaccardi said. “We’ll see how markets ‘react to the reaction’ as the morning progresses, but bulls point to strong seasonal trends that begin right about now. Bears have a very uncertain earnings season along with an uncertain CPI figure next week that both could draw volatility.”
ADSS, an international brokerage highlighted: “The US jobs market has maintained its strong position despite adding 52,000 less jobs than the previous month. With 263,000 new jobs in September, this slowdown in job growth still represents a healthy expansion, however, it may be difficult to sustain in the mid to long term given the growing concerns of a recession and dipping consumer sentiment on the back of inflation and interest rate hikes.”
Among active stocks, AMD is down after a miss in preliminary Q3 sales.