The stock market was wavering on Friday after the September jobs report missed estimates, though the data were better than the headline result would suggest.
By midday, the Dow Jones Industrial Average was up 23 points, or 0.1%, while the S&P 500 was little changed and the Nasdaq Composite was down 0.2%. All three indexes wavered between mild gains and losses over the course of the day. The 10-year U.S. Treasury yield initially dipped, then rose to 1.61%.
With bond yields higher and the economically-sensitive Dow outperforming the other two major indexes, markets seemed somewhat optimistic on the direction of the economy.
The U.S. added 194,000 jobs in September, missing forecasts for 500,000 and below August’s revised reading of 366,000. The unemployment rate, however, fell to 4.8%.
But there were revisions to summer job gains; there were 169,000 more jobs added in the summer than what initial reports showed, which makes the current job growth picture look much stronger.
“The market’s looking through the headline number,” said Mark Luschini, chief investment strategist at Janney Montgomery. “One [reason] was the revision to the two months number, which cranks the overall number up to 300,000.”https://tpc.googlesyndication.com/safeframe/1-0-38/html/container.html
Also, 74,000 jobs were added in the leisure and hospitality industry, while government jobs declined, meaning that some expect total jobs gains to be strong going forward.
“Most of the shortfall was government, which was somehow as negative,” said Rhys Williams, chief investment officer at Spouting Rock Asset Management.
Given these assumptions, the Federal Reserve is still likely to soon begin reducing its bond purchases.
“One weaker-than-expected jobs number is not likely to change the Fed’s thinking,” wrote Richard Saperstein, chief investment officer of Treasury Partners. “The Federal Reserve remains on course to begin tapering its stimulus in November or December.”
Less Fed bond-buying means less money will move into the bond market, which could drag bond prices lower and lift their yields. Higher bond yields make future profits less valuable, putting outsize pressure on the technology-heavy Nasdaq.
Overseas, Tokyo’s Nikkei 225 rose 1.3%, as investors reacted positively to Prime Minister Fumio Kishida’s orders for his cabinet to compile economic stimulus measures for an extra budget to be submitted after an election at the end of the month.