Stocks rallied Friday even after the release of stronger-than-expected U.S. jobs data and a pop in Treasury yields.
The U.S. economy added 336,000 jobs in September, the Labor Department said. Economists polled by Dow Jones expected 170,000 jobs. To be sure, wages rose less than expected last month.
Stocks posted a stunning turnaround on Friday, after initially falling on the stronger-than-expected jobs report. At its session low, the Dow had fallen as much as 272 points; it surged by more than 400 points at the height of the rally. The Nasdaq and the S&P 500 slid by 0.9% during their lowest points in the day.
Traders were unclear of the reason for the intraday reversal. Some noted it could be the softer wage number in the jobs report that made investors rethink their earlier bearish stance. Others noted the pullback in yields from the day’s highs. Part of the rally may just be to do a market that had gotten extremely oversold with the S&P 500 at one point this week down more than 8% from its high earlier this year.
Yields initially surged after the report, with the 10-year Treasury rate trading near its highest level in 16 years. The benchmark rate later eased from those levels, but was still up around 6 basis points at 4.78%.
“We’re seeing a little bit of a give back in yields from where we were around 4.8%. [With] them pulling back a bit, I think that’s helping the stock market,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. “We’ve had quite a bit of weakness in the market in recent weeks, [and] some oversold conditions.”
10-Year U.S. Treasury
“There is likely enough good news from wage growth and the unemployment rate to keep the Fed from returning to rate hikes. While market expectations about what the FOMC will do have shifted a bit after digesting this morning’s report, there is still a strong expectation that rates will remain unchanged in November,” said Dante DeAntonio, labor economist at Moody’s Analytics.
The S&P 500 ended the week up 0.48%, breaking a four-week negative streak. The Nasdaq also notched a positive week, climbing 1.60%. Meanwhile, the Dow closed down 0.30% for the week.