Jobs Data Likely To Weigh On Wall Street As Treasury Yields Surge

The major U.S. index futures are currently pointing to a notably lower open on Friday, with the futures coming under pressure following the release of a Labor Department report showing U.S. employment surged by much more than expected in the month of September.

The Labor Department said non-farm payroll employment shot up by 336,000 jobs in September after jumping by an upwardly revised 227,000 jobs in August.

Economists had expected employment to increase by 170,000 jobs compared to the addition of 187,000 jobs originally reported for the previous month.

Meanwhile, the report said the unemployment rate in September came in unchanged from August at 3.8 percent. The unemployment rate was expected to edge down to 3.7 percent.

The report has triggered a spike by treasury yields amid renewed concerns about the outlook for interest rates, with yields once again soaring to their highest levels in over sixteen years.

While the data paints a positive picture of the economy, the Federal Reserve has warned about the impact of labor market tightness.

Investors were already worried about the prospect of further interest rates hikes, and the data is likely to add to their concerns.

Stocks came under pressure early in the session on Thursday but staged a notable recovery attempt over the course of the trading day. The major averages peeked above the unchanged line late in the session but closed modestly lower.

After falling by nearly 190 points in early trading, the Dow ended the day down just 9.98 points or less than a tenth of a percent at 33,119.57. The Nasdaq edged down 16.18 points or 0.1 percent to13,219.83, while the S&P 500 slipped 5.56 points or 0.1 percent to 4,258.19.

The early weakness on Wall Street came as traders remain worried about the outlook for interest rates ahead of the release of closely watched employment data.

Selling pressure waned over the course of the session, however, with a continue pullback by treasury yields inspiring some traders to pick up stocks at reduced levels.

Ahead of the monthly jobs report, the Labor Department released a report showing a slight uptick in first-time claims for U.S. unemployment benefits in the week ended September 30th.

The report said initial jobless claims crept up to 207,000, an increase of 2,000 from the previous week’s revised level of 205,000.

Economists had expected jobless claims to rise to 210,000 from the 204,000 originally reported for the previous week.

Biotechnology stocks showed a strong move to the upside over the course of the session, driving the NYSE Arca Biotechnology Index up by 1.5 percent. The index continued to regain ground after ending Tuesday’s session at an eleven-month closing low.

Significant strength also emerged among brokerage stocks, as reflected by the 1.2 percent gain posted by the NYSE Securities Arca Broker/Dealer Index.

Gold and natural gas stocks also saw notable strength on the day on the day, with the NYSE Arca Gold Bugs Index and the NYSE Arca Natural Gas Index climbing by 1.2 percent and 1.1 percent, respectively.

Meanwhile, networking stocks continued to see substantial weakness, dragging the NYSE Arca Networking Index down by 3.0 percent to its lowest closing level in over a year.

Commodity, Currency Markets

Crude oil futures are sliding $0.62 to $81.69 a barrel after tumbling $1.91 to $82.31 a barrel on Thursday. Meanwhile, after edging down $3 to $1,831.80 an ounce in the previous session, gold futures are slipping $6.30 to $1,825.50 an ounce.

On the currency front, the U.S. dollar is trading at 149.35 yen versus the 148.51 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0513 compared to yesterday’s $1.0550.

Asia

Asian stocks ended mixed on Friday as investors awaited U.S. nonfarm payrolls data due later in the day for additional clues to the economic and interest rate outlook.

Benchmark 10-year U.S. Treasury yields pulled back a little, the dollar was on track to post its 12th weekly gain and gold edged up from seven-month lows, while Brent crude prices extended two days of steep losses on demand worries.

Hong Kong markets led regional gains ahead of the reopening of Chinese markets next week after the Golden week holiday. The Hang Seng Index rebounded from a 11-month low to settle 1.6 percent higher at 17,485.98.

Japanese shares ended a choppy session slightly lower after data showed Japanese household spending in August fell 2.5 percent from a year earlier, declining for the sixth consecutive month.

The Nikkei 225 Index slipped 0.3 percent to 30,994.67, while the broader Topix Index closed little changed with a positive bias at 2,264.08.

The yen stabilized near USD/JPY 148 level after testing the 150 barrier earlier this week. Heavyweight chip-related stocks fell, with Advantest and Tokyo Electron falling around 2 percent each.

Onward Holdings slumped 5.2 percent despite the apparel group raised its annual profit forecast.

Seoul stocks eked out modest gains, with the Kospi rising 0.2 percent to 2,408.73 as foreign investors continued their selling streak for the 11th consecutive day.

Market bellwether Samsung Electronics fell over 1 percent, while auto and financial stocks closed broadly higher. Kia Corp., KB Financial Group and Shinhan Financial Group jumped 2-4 percent.

Australian markets advanced as gains in the financial sector offset losses among gold miners and energy stocks. The benchmark S&P ASX 200 Index rose 0.4 percent to 6,954.20, while the broader All Ordinaries Index finished 0.4 percent higher at 7,143.

Europe

European stocks are seeing modest gains on Friday after data showed Germany’s factory orders rebounded at a stronger-than-expected pace in August, reflecting the robust expansion in demand for computing, electronic and optical products.

Factory orders registered monthly growth of 3.9 percent, in contrast to the 11.3 percent decrease in July, Destatis reported.

Investors shrugged off survey data from the Lloyds Bank subsidiary Halifax and S&P Global showing that U.K. house prices fell for the sixth straight month in September as higher interest rates weighed on mortgage affordability.

House prices slid 0.4 percent on a monthly basis in September. This was the sixth straight month of decline but markedly slower than the 1.8 percent fall in August.

European Central Bank board member Isabel Schnabel said earlier today that interest rates may need to rise again if needed to tame consumer prices. The ECB announces its next rate decision on October 26.

The major indexes in the region have given back ground following the U.S. jobs report but currently remain modestly higher. While the U.K.’s FTSE 100 Index is up by 0.1 percent, the French CAC 40 Index and the German DAX Index are both up by 0.2 percent.
Payment services provider Adyen has rallied after investment firm TD Cowen started coverage of the stock with a “market perform” rating.

Swedish commercial vehicle major AB Volvo and French auto major Renault have also risen after announcing they are forming a new company to manage the development of an all-new generation of electrified vans.

GSK has edged up slightly in London after the drug maker agreed to sell 270 million shares in its former consumer unit Haleon at a price of 328 pence per share, raising gross proceeds of around 885.6 million pounds.

De La Rue plc, a provider of secure digital, physical, surety, and control solutions, has jumped after saying it expects adjusted operating profit for the first half to be slightly ahead of its prior view of breakeven.

Aviva has also soared. The Times newspaper reported that at least two potential suitors are looking for a possible takeover of the insurance company.

Metro Bank has also surged on reports that it has begun talks to sell a £3 billion chunk of its mortgage book.

Meanwhile, Philips shares have plunged nearly after the U.S. FDA said it is not satisfied with how the Dutch health care technology company handled a major product recall.

Pub operator J D Wetherspoon has also tumbled despite returning to an annual profit for the first time since the start of the coronavirus pandemic three years ago.

U.S. Economic Reports

A closely watched report released by the Labor Department on Friday showed employment in the U.S. surged by much more than expected in the month of September.

The Labor Department said non-farm payroll employment shot up by 336,000 jobs in September after jumping by an upwardly revised 227,000 jobs in August.

Economists had expected employment to increase by 170,000 jobs compared to the addition of 187,000 jobs originally reported for the previous month.

Meanwhile, the report said the unemployment rate in September came in unchanged from August at 3.8 percent. The unemployment rate was expected to edge down to 3.7 percent.

At 12 pm ET, Federal Reserve Board Governor Christopher Waller is due to speak before the Brookings Institution’s “Making America’s Payment System Work for a Digital Currency” event.

The Federal Reserve is scheduled to release its report on consumer credit in the month of August at 3 pm ET. Consumer credit is expected to increase by $11.7 billion.

Stocks In Focus

Shares of Pioneer Natural Resources (PXD) are moving sharply higher in pre-market trading after a report from the Wall Street Journal said Exxon Mobil (XOM) is closing in on a deal to buy the shale driller for approximately $60 billion.

Biotechnology company Apellis Pharmaceuticals (APLS) may also see initial strength after reporting strong growth in demand for its drug Syfovre and JPMorgan upgraded its rating on the company’s stock to Overweight from Neutral.

On the other hand, shares of Aehr Test Systems (AEHR) are seeing substantial pre-market weakness even though the company reported better than expected fiscal first quarter results. The company also reaffirmed its full-year guidance.

Denim apparel maker Levi Strauss (LEVI) may also move to the downside after reporting fiscal third quarter earnings that beat analyst estimates but lowering its full-year sales forecast.