Futures Advance As Job Growth Falls Short Of Estimates

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to extend the strong upward move seen over the past several sessions.

The futures advanced following the release of a Labor Department report showing U.S. employment rose by less than expected in the month of October.

The closely watched report said employment climbed by 150,000 jobs in October after jumping by a downwardly revised 297,000 jobs in September.

Economists had expected employment to increase by 180,000 jobs compared to the surge of 336,000 jobs originally reported for the previous month.

The Labor Department also said the unemployment rate crept up to 3.9 percent in October from 3.8 percent in September. The unemployment rate was expected to remain unchanged.

The data is likely to add to optimism the Federal Reserve is done raising interest rates after the central bank left interest rates unchanged for the third time in four meetings earlier this week.

Treasury yields are extending a recent slump following the release of the report, potentially adding to the buying interest on Wall Street.

Extending the strong upward move seen over the past several sessions, stocks moved sharply higher during trading on Thursday. The major averages all showed significant moves to the upside, climbing further off last week’s multi-month lows.

The major averages saw continued strength going into the close, ending the session near their best levels of the day. The Dow jumped 564.50 points or 1.7 percent to 33,839.08, the Nasdaq surged 232.72 points or 1.8 percent to 13,294.19 and the S&P 500 spiked 79.92 points or 1.9 percent to 4,317.78.

The extended rally on Wall Street came amid optimism about the outlook for interest rates following the Federal Reserve’s monetary policy announcement on Wednesday.

The Fed left interest rates unchanged for the third time in the past four meetings, leading to optimism that the central bank is done raising interest rates.

Treasury yields moved notably lower on Wednesday and showed another significant move to the downside today, adding to the buying interest.

The latest economic data added to the optimism about rates, with the Labor Department releasing a report showing an unexpected uptick in first-time claims for U.S. unemployment benefits in the week ended October 28th.

The report said initial jobless claims crept up to 217,000, an increase of 5,000 from the previous week’s revised level of 212,000.

Economists had expected jobless claims to come in unchanged compared to the 210,000 originally reported for the previous week.

A separate report from the Labor Department also showed an unexpected decrease in unit labor costs in the third quarter.

The Labor Department said unit labor costs fell by 0.8 percent in the third quarter after shooting up by a revised 3.2 percent in the second quarter.

Unit labor costs were expected to climb by 0.7 percent compared to the 2.2 percent increase that had been reported for the previous quarter.

Banking stocks moved sharply higher over the course of the session, resulting in a 4.5 percent spike by the KBW Bank Index.

Interest rate-sensitive housing also saw substantial strength on the day, with the Philadelphia Housing Sector Index surging by 3.4 percent.

A significant increase by the price of crude oil also contributed to a rally by oil service stocks, driving the Philadelphia Oil Service Index up by 3.4 percent.

Airline, commercial real estate and telecom stocks also saw considerable strength, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are jumping $0.98 to $83.44 a barrel after surging $2.02 to $82.46 a barrel on Thursday. Meanwhile, after edging up $6 to $1,993.50 an ounce in the previous session, gold futures are rising $14 to $2,007.50 an ounce.

On the currency front, the U.S. dollar is trading at 149.50 yen versus the 150.45 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0701 compared to yesterday’s $1.0622.

Asia

Asian stocks rallied on Friday as the Fed’s steady monetary policy approach coupled with labor market data released this week and a lower-than-expected supply of longer-dated bonds raised hopes that the U.S. central bank has finished raising rates.

The dollar slipped and the benchmark 10-year U.S. Treasury yield hit a three-week low ahead of the October jobs report due later in the day, which is expected to show a slowdown in hiring.

Gold edged up on dollar weakness, while oil extended overnight gains despite weaker service sector activity data from China.

Japanese markets were closed for a holiday. China’s Shanghai Composite Index rose 0.7 percent to 3,030.80 after a private sector survey revealed that Chinese services activity expanded at a slightly faster pace in October. The headline Caixin services PMI improved to 50.4 from September’s nine-month low of 50.2.

Hong Kong’s Hang Seng Index soared 2.5 percent to 17,664.12 despite survey results showing further contraction in Hong Kong’s private sector activity in October.

Seoul stocks advanced as positive global sentiment offset data showing that South Korea’s foreign reserves fell for a third straight month in October. The Kospi jumped 1.1 percent to 2,368.34.

Australian markets closed higher after data showed retail sales volume ticked up in the September quarter. The benchmark S&P ASX 200 Index shot up 1.1 percent to 6,978.20, while the broader All Ordinaries Index settled 1.1 percent higher at 7,175.10.

Industrials led the rally, while energy stocks underperformed following wild swings in crude oil price movements throughout the week.

National carrier Qantas jumped 2 percent after holding its AGM in Melbourne. Investment bank Macquarie Group added 1.8 percent on share buyback news.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index closed 0.7 percent higher at 11,118.92.

Europe

European stocks are slightly higher on Friday as weak U.S. economic data released overnight has spurred bets the Federal Reserve is done with its rate hikes for the year.

Meanwhile, investors shrugged off data showing that German exports declined more than expected in September.

Exports decreased 2.4 percent month-on-month, in contrast to the 0.1 percent gain in August, Destatis reported. Economists had forecast shipments to decline 1.1 percent.

Elsewhere, data showed that industrial production in France fell for the second successive month in September.

While the U.K.’s FTSE 100 Index is nearly unchanged, the French CAC 40 Index is up by 0.2 percent and the German DAX Index is up by 0.4 percent.

Medical products maker Smith+Nephew has moved sharply higher in London after downplaying concerns about weight-loss drugs.

Currys has also surged. As part of efforts to simplify its business, the electricals retailer has sold its Greece and Cyprus retail business Kotsovolos to Public Power Corporation S.A. for an enterprise value of 200 million euros ($212.4 million).

German automaker BMW has also rallied after posting a margin of 9.8 percent in the third quarter for its luxury car business. Volvo Car has also jumped after sales rose 10 percent year-on-year in October.

Property company Deutsche Wohnen has also moved notably higher as it reported preliminary FFO or funds from operations of 456.3 million euros or 1.15 euros per share for the 9-month period.

Krones AG has also advanced. The packaging and bottling machine maker reported that its third quarter consolidated net income climbed 20.4 percent to 54.3 million euros from the prior year.

On the other hand, shipping group A.P. Moller-Maersk has plunged after announcing that it plans to axe at least 10,000 jobs.

Swiss Re has also slumped despite the property-and-casualty reinsurance firm swinging to a net profit for the third quarter, helped by lower catastrophes and higher rates.

U.S. Economic Reports

After reporting much stronger than expected job growth in the previous month, the Labor Department released a report on Friday showing U.S. employment rose by less than expected in the month of October.

The closely watched report said employment climbed by 150,000 jobs in October after jumping by a downwardly revised 297,000 jobs in September.

Economists had expected employment to increase by 180,000 jobs compared to the surge of 336,000 jobs originally reported for the previous month.

The Labor Department also said the unemployment rate crept up to 3.9 percent in October from 3.8 percent in September. The unemployment rate was expected to remain unchanged.

At 10 am ET, the Institute for Supply Management is scheduled to release its report on service sector activity in the month of October.

The ISM’s services PMI is expected to edge down to 53.0 in October from 53.6 in September, although above 50 would still indicate growth.

Minneapolis Federal Reserve President Neel Kashkari is due to participate in a leadership discussion at the Economic Club of Minnesota at 12:45 pm ET.

At 3 pm ET, Federal Reserve Vice Chair for Supervision Michael Barr is scheduled to participate virtually in a discussion on the Community Reinvestment Act before “The New Community Reinvestment Act Rule: What It Means For Communities Around the Country” event.

Stocks In Focus

Shares of Block (SQ) are surging in pre-market trading after the financial technology company reported better than expected third quarter results and raised its full-year guidance.

Travel booking platform Expedia (EXPD) is also likely to see initial strength after reporting third quarter results that exceeded analyst estimates on both the top and bottom lines.

Meanwhile, shares of Fortinet (FTNT) are seeing substantial pre-market weakness after the cybersecurity company reported slightly weaker than expected third quarter revenue and provided disappointing revenue guidance for the current quarter.

Home goods retailer Floor & Decor Holdings (FND) is also likely to come under pressure after reporting weaker than expected third quarter results and lowering its full-year forecast.