US equity indexes experienced notable gains alongside rising government bond yields as the labor market reported a significant increase in job additions, surpassing market expectations. This positive data points to a robust economy, alleviating concerns about surging crude oil prices. The Nasdaq Composite rose impressively by 0.9%, reaching 18,075.2, while the S&P 500 increased by 0.6% to 5,731.5.
The Dow Jones Industrial Average recorded a gain of 0.5%, concluding the day at 42,208.7 after midday trading on Friday. Within the index performance, consumer discretionary, energy, and financial sectors emerged as the leading gainers, while real estate struggled, making it the top decliner. From an economic perspective, the Bureau of Labor Statistics disclosed that nonfarm payrolls surged by 254,000 in September, significantly higher than the anticipated 150,000 increase based on a Bloomberg survey.
Additionally, revisions indicated gains for August were adjusted up by 17,000 and those for July by 55,000, reflecting stronger-than-expected prior performance. The unemployment rate showed a decline to 4.1% from August’s 4.2%, aligning with market forecasts for September. Moreover, average hourly earnings registered a sequential growth of 0.4%, surpassing the Street's expectations of a 0.3% increment.
On an annual basis, wage growth marked an impressive increase of 4%, exceeding projected growth of 3.8%. In response to the favorable jobs data, the probability of a 25 basis-point cut in the Federal Reserve's target rate surged to 95%, a significant rise from 68% the previous day, as indicated by the CME Group’s FedWatch Tool.
The remaining 5% reflects the likelihood of rates remaining unchanged. Notably, the previously anticipated 50 basis-point reduction scheduled for Nov. 7 seems less likely compared to the 32% chance projected a day prior. Nancy Vanden Houten, lead economist at Oxford Economics, noted in an email to MT Newswires, "The September employment report was much stronger than expected, with job growth blowing past expectations, the unemployment rate declining and wage growth accelerating." She suggested that this robust report makes additional 50-basis-point reductions improbable, with expectations leaning towards a 25-basis-point cut in both November and December. In the bond market, US Treasury yields responded strongly; the 10-year yield rose 11.9 basis points to 3.97%, while the two-year rate jumped 19.9 basis points to a total of 3.91%.
Meanwhile, the CBOE Volatility Index, often referred to as the fear gauge for investors, decreased by 6.7%, settling at 19.12. Precious metal markets showed fluctuations, with gold prices declining 0.6% to $2,663.31 per ounce and silver dropping 0.2% to $32.41, ultimately erasing earlier gains. In crude oil markets, West Texas Intermediate saw a spike, increasing by 2.3% to $75.43 a barrel, building on gains from Thursday when President Joe Biden announced that the US is in talks with Israel concerning a potential retaliatory strike against Iranian oil infrastructure.
Helima Croft, head of global commodity strategy and MENA research at RBC Capital Markets, stated, "US intelligence has previously highlighted the risk to the Kharg Island oil export facilities, which function as a central nervous system for Iran's oil sector, handling most of the country's crude exports." Turning to company news, Stifel updated its price target for Norwegian Cruise Line Holdings ($NCLH) to $29, up from $27, while maintaining a buy rating.
The cruise operator’s shares surged by 3.4% in response. Concurrently, Guggenheim raised Home Depot's ($HD) price objective from $390 to $450 while preserving its buy rating; however, shares of the home improvement heavyweight recorded a 1% decline, making it one of the steepest decliners on the Dow..