U.S. stocks kicked-off the first trading session of September on a high note Friday, with investors looking to solid gains following a key August jobs report that could set the tone for what is traditionally the toughest month of the year for domestic stocks.
The Labor Department's Bureau of Labor Statistics said 187,000 new jobs were created last month, firmly ahead of the Wall Street consensus forecast of a 170,000 gain, which was the weakest monthly increase since December 2020.
Private-payroll gains were pegged at 179,000, the BLS said, topping analysts' estimates of a 150,000, although the unemployment rate jumped to 3.8%, just ahead of the 1969 low of 3.4% recorded earlier this year.
Wall Street closed out August with losses across all three major benchmarks, with the S&P 500 and the Nasdaq recording declines of 1.8% and 2.2% respectively -- their worst monthly performance since February -- amid renewed rate hikes fears tied to a hawkish Federal Reserve.
That puts Friday's August non-farm payroll report in sharp focus as investors look for further evidence from the job market that wage growth, a key Fed inflation concern, is slowing into the autumn months.
The softer wage reading could both cement market forecasts that the Fed will make no changes to its benchmark lending rate, which currently sits between 5.25% and 5.5%, when it meets later this month in Washington, while also paring bets on a November rate hike, the chances of which currently sit at around 38%, according to the CME Group's FedWatch.
"We expect August’s employment report to be like prior months where the headline number shows a moderating labor market even if wages and other components suggest more caution," said Vanguard senior economist Andrew Patterson. "We will be very focused on wage growth Friday and in subsequent reports as we believe it needs to fall to 3% to 3.5% before the Fed can be comfortable in achieving their inflation target."
Treasury bond yields were the first to react to the 8:30 am Eastern time jobs release, with benchmark 10-year notes, which touched a 2007 high of 4.366% last week, falling to 4.069% in early New York trading - helped along by a series of softer-than-expected job market data releases that suggest the Fed could keep its current lending rate on hold well into 2024.
The notes were last seen trading at 4.185% while 2-year notes were pegged at 4.881%.
On Wall Street, stocks were higher following the data release, with the Dow Jones Industrial Average rising 71 points in late morning trading Friday and the S&P 500 booking a 15 point advance. The tech-focused Nasdaq was up 2 points.
Markets will likely need the extra support heading into the month as CFRA data suggest September has been the toughest for stocks on record, falling an average of 0.7% in every year since 1945.
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