U.S. stocks powered higher Friday, reversing earlier gains, as investors focused on softer-than-expected wage data in an otherwise solid jobs report that could test the bond market's recent slump and bets on an end-of-year rate hike from the Federal Reserve.
The Labor Department's Bureau of Labor Statistics said 336,000 new jobs were created last month, well ahead of the Wall Street consensus forecast of a 170,000 gain and the second largest gain of the year as the labor market holds steady into the autumn months amid a resilient broader economy.
The shocking tally was partly mitigated by softer wage gains, with the BLS noting that hourly wages were up 0.2% on the month - compared with the 0.2% gain recorded in August and Wall Street's consensus forecast for a 0.3% gain. On an annual basis, wages were up 4.2%, again shy of Wall Street's 4.3% forecast.
Still, the labor market strength has sparked renewed inflation concerns, which, alongside signals of 'higher-for-longer' interest rates from the Federal Reserve and the ongoing political and fiscal chaos in Washington, triggered a sharp move higher in Treasury yields.
Surging Treasury bond yields, which have added around 55 basis points to benchmark 10-year notes over the past five weeks, have in turn rattled global markets and pushed the S&P 500 into its longest weekly losing streak since May of 2022.
A softer-than-expected jobs report today would have eased some of those concerns, and dovetail with recent comments from San Francisco Fed President Mary Daly that higher bond yields are negating the need for another rate hike as the economy, though solid, shows signs of slowing over the coming months.
Benchmark 10-year notes were last pegged at 4.784% in afternoon New York trading, down around 6 basis points on the session, with 2-year notes changing hands at 5.085%
Benchmark 30-year bonds, the most sensitive to interest rate changes, surged well past 5% to a fresh multi-decade high of 5.045% in dearly dealing before falling back to 4.935%.
"The U.S. labor markets remains extremely tight, with September’s non-farm payrolls more than double market expectations and reflects a monthly gain well above the 267,000 monthly run rate over the prior 12 months,: said Michelle Cluver, Portfolio Strategist, at Global X ETFs.
"Unfortunately for markets, this reading reflects there could be more the Fed needs to do to contain inflation pressures," she added. "While encouraging for the resilience of the U.S. economy, this exceptionally strong reading is a challenge for markets."
U.S. stocks turned lower following the data release, but powered higher as the session progressed with the Dow Jones Industrial Average rising 332 points and the S&P 500 up 52 points, or 1.3% in early afternoon trading. The tech-focused Nasdaq was up 202 points, or around 1.5%.
In other markets, global oils prices were modestly higher on the session, but largely on pace for another weekly decline and their longest losing streak since March following a the Energy Department's report of a surprise build-up in gasoline stocks earlier this week.
With oil nearing the $100 mark late last month, but overall energy demand looking to fade as Europe faces recession and China growth sputters, the prices for crude, compared to their underlying products, appeared to high for traders and were quickly reversed this week.
A report from OPEC, published Friday, that boosted the cartel's end of year demand outlook, helped crude reverse earlier declines.
Brent crude contacts for December delivery, the global pricing benchmark, were last seen 41 cents higher at $84.50 per barrel while WTI contracts for November, which are tightly-linked to U.S. gasoline prices, edged 35 cents higher to $82.66 per barrel.
In overseas markets, stocks were largely tracking U.S. equity futures ahead of the September jobs report, with Europe's region-wide Stoxx 600 falling 0.1% in early Frankfurt trading and Britain's FTSE 100 edging 0.16% higher in London.
Stocks in Asia were mixed, with Japan's Nikkei 225 ending 0.26% lower in the session, just shy of its four-month low, and China markets trading modestly higher following the return of trading from the Golden Week holiday celebrations.
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