Article published at 9:35 a.m. CT
JJ Kinahan is Senior Vice President, Head of Retail Expansion and Alternative Investment Products at Cboe Global Markets, Inc. (Cboe).
Key Takeaways:
- Unemployment rate edges higher to 4.2%
- Jobs report lightens pressure on interest rate hike
- Treasury yields and crude oil prices fall
In a sign of how the markets often don’t reflect the economy, stocks moved higher and Treasury yields fell after the monthly jobs report signaled weakness that could put interest rate hikes on pause.
The unemployment rate inched up to 4.2% from 4.1% as employers added 29,000 in September, well below the 89,000 Wall Street was expecting. Wage growth was soft too, with average hourly earnings up only 0.1% compared with an expected 0.3% increase. Wage growth stood at 3% on an annual basis, below the 3.4% inflation rate.
To be sure, the labor market is still showing signs of resilience amid many walls of worry, but the report likely lightens the inflationary pressure that would prompt the Federal Reserve to raise interest rates this month. Think of it this way: If fewer people are working, there is less spending and the economy slows down.
Will this be enough to hold off hikes for the rest of the year? It’s hard to say but the Cboe Volatility Index® (VIX® Index) is telling us that investors’ views of volatility going forward are low, falling 5.25% to 15.53. The CME FedWatch tool is also telling us that there’s an 81.7% probability that rates will stand put at 3.75% to 4.0%, compared with a 35.8% likelihood a week ago and 75.6% yesterday.
The news also helped lighten the 10-year yield, which hit a 24-year high Thursday. In early trading, the 10-year stood at 5.19%.
Stocks moved to the upside, with the Nasdaq Composite higher by 1.53% while the S&P 500 Index is up 0.93% and the Dow Jones Industrial Average is adding 0.52%. Today’s market moves are a contrast to Thursday’s topsy-turvy moves that ended with all three major market indices just barely in the green.
WTI Crude Oil prices are dropping 3.88% to the low-$89-per-barrel range as oil shipments through the Strait of Hormuz are slowly moving, though still with some risk, according to analysts. At the same time, the European Union is considering releasing diesel and crude reserves to ease prices, according to published reports.
Broadcom shares are higher by 1.6% after Bloomberg reported that the chip designer’s Wall Street syndicate is putting together $60 billion in fresh artificial intelligence (AI) financing to help Anthropic and other like AI firms.
That offers traders a sense of support for the immense AI investments that have been made this year. Shares of Marvell are tacking on 3.66%, Intel is higher by 3.17% and Advanced Micro Devices is up 2.88%. Nvidia shares, which also got a boost from Morgan Stanley analysts, are advancing 2.37%.
Twilio shares are falling 0.28% despite a report that the cloud communications platform is replacing Warner Bros. Discovery on the S&P 500 on Oct. 6. Typically, stocks pop when they get added to the S&P 500 because index funds and exchange-traded funds (ETFs) that track the S&P are obligated to purchase shares, giving the newcomer broader visibility.
Also falling are shares of Nike, which are down 5.43% in early trading and off 47.5% on the year, which CNBC reported was the worst performance among Dow stocks. Late Thursday, the athletic apparel and equipment retailer released earnings that fell short of Wall Street’s expectations and said revenues are expected to drop going forward. Sales in China have slumped for nine straight quarters. As a result, Nike is taking on a major restructuring to reduce the size of the company and cut jobs beginning in 2027.
Happy Trading!
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