Disappointing Jobs Data Rounded Out a Busy Week on Wall Street

It was a busy week on Wall Street as investors closed out a disappointing third quarter, and then were walloped on Friday by a much worse-than-expected September jobs report.

Here’s the market action you might have missed this week.

September Disappointment

Investors sent September packing and never looked back after the month brought with it a surprise decision from the Federal Reserve not to hike short-term rates from historic lows, and a wholly disappointing jobs report.

September was a month in which the major U.S. averages shed nearly 7% of their market value, the worst quarter in four years, thanks to heightened concerns about global growth as weak data in China over the summer forced the nation to devalue its currency not one but two times. Coupled with worries about whether the U.S. would be able to reach its 2% inflation target before the Fed could raise rates, equity markets saw a rough three months that came to a close on Wednesday.

But September’s ghost reared its head on Friday when the Labor Department released its non-farm payrolls report for the month which showed a steep decline on nearly every headline number. The U.S. economy added just 142,000 jobs last month, while Wall Street had expected a gain of 203,000. The labor force participation rate ticked lower to 62.4% from 62.6% in August. Meanwhile, the unemployment rate held steady at 5.1% for the month.

In reaction to the report, U.S. equity markets immediately fell into a sharp decline, but by the closing bell, Wall Street decided that the weakness didn’t necessarily spell a delay for the Fed and its rate-hike timeline.

Third Quarter in the Rear View

The third quarter brought with it many disappointments as investors all around the world stopped dead in their tracks amid heightened concerns about whether the global economy was in danger of stalling – and putting the brakes on a U.S. rate hike anytime in the near future.

The quarter was the worst for U.S. markets in four years. Domestic crude oil prices plunged 8.35% over the three-month period, while the energy sector as a whole tumbled 18%.

The best performing sector in 3Q was utilities, which was the only one of 10 S&P 500 sectors to close the quarter in positive territory. It ended 4.39% higher.

But while the quarter might have been gloomy, the major banks on Wall Street are still expecting modest growth for the markets by the last day of December. Goldman Sachs earlier this week revised its S&P 500 price target to 2000 by year’s end.

“A year-end level of 2000 would equate to just a 7% rebound from trough, weaker than 13 of 14 recoveries and roughly in line with the recovery in October 1999,” the bank told clients in the note.

The Government Shutdown That Wasn’t

The government was able to keep its lights on…an least for another two months…thanks to a stop-gap funding bill passed by Congress on Wednesday afternoon.

Unlike in years past, lawmakers this time around agreed that the political consequences of a government shutdown  -- no matter how short – were not worth the risk. Even just a week ago, Wall Street began to grow concerned about the growing odds of a partial shutdown thanks to, of all things, a battle that’s been brewing on the Hill over funding Planned Parenthood.

Over the summer, videos surfaced that allegedly showed executives at the women’s organization negotiating the sale of fetal tissue for profit. Republicans had planned to pin their votes of any continuing resolution, or stop-gap, temporary funding, to the discontinuation of federal funds to the organization.

However, when all was said and done, Republicans voted to pass a temporary bill to fund the government…and Planned Parenthood.

Shutdown averted. For now.

Lawmakers are gearing up for perhaps a bigger fight later this year when the nation reaches its borrowing limit in December. At that point, they’ll have to decide whether to raise the debt ceiling, or make massive cuts to the government’s spending programs. Recall the arbitrary cuts two years ago, known as sequestration, to defense spending and other funding areas.

Solid Consumer Data

While September was full of volatility for Wall Street, it wasn’t all bad news.

This week saw better-than-expected consumer data with the release of the Conference Board’s consumer confidence gauge. It came in at 103 in September from a revised 101.3 in August. Economists had expected a dip to 97.

Meanwhile, September auto sales revved up during the month as the big three automakers handily beat their expected targets.

Ford (NYSE:F) saw the strongest month of the three companies as sales surged 23%. Fiat Chrysler (NYSE:FCAU) saw a 14% increase, while GM (NYSE:GM) posted a 12.5% jump.

Persistently low gas prices thanks to the recent swoon in crude oil prices, and low interest rates helped drive more consumers to the lot during the month.

On Deck Next Week

The economic-data calendar lightens up next week with few key reports on tap. Here’s what to expect.

• ISM service-sector activity
• International trade
• Consumer credit
• Weekly jobless claims
• Release of the September FOMC minutes
• Import/export prices