Wall Street Caps Volatile Session with a Rally After September Jobs

U.S. equity markets bounced back in afternoon trading, washing away a sea of red that followed a September jobs report which came in much worse than expected.

The Dow Jones Industrial Average was 200 points higher, or 1.23% to 16472. The S&P 500 rose 27 points, or 1.43% to 1951, while the Nasdaq Composite gained 80 points or 1.74% to 4707.

The financial sector was the only one of 10 in negative territory, ending the session down 0.19%, as energy led the sectors in advancement, as it surged more than 4%.

Today’s Markets

Global investors had one thing on their minds on Friday: The all-important September non-farm payrolls report. The report from the Labor Department came in much weaker than had been anticipated. Data showed the economy added just 142,000 jobs last month, far below economists’ expectations for a gain of 203,000 jobs. The labor force participation rate ticked lower to 62.4% from 62.6% in August, while the unemployment rate held steady at 5.1% for the month.

The data is one of the key pieces of the economic puzzle central bankers will use at their next Federal Open Market Committee meeting at the end of this month. The Federal Reserve has stood firm on its message that it is data dependent and that a decision on when to raise short-term interest rates from historic lows will come only when it feels as though it has met its dual mandate of full employment and price stability, or inflation around 2%.

Inflation data have not met the target, but the labor market has been  widely seen as nearing a point that can withstand higher rates. However, the September numbers – which came alongside downwardly revised numbers for August – could throw a wrench in that thought process.

“This probably gives the Fed some more wiggle room with respect to their rate decision,” Kirk Barneby, Centre Active U.S. Treasury Fund portfolio manager said. “Had it been a strong number, it would have been a lot of pressure on the Fed to raise rates at the October meeting…they now have greater flexibility in looking at other issues like the pace of inflation or wage growth, what’s going on overseas, the strength of the U.S. dollar, and growth in foreign economies.”

For context, wages rose 0.3% in August from July, slightly more than had been anticipated and 2% from the same period the year prior.

Barneby said, though, that while the headline figures are much worse than expected, there are a few bright spots to consider.

“The 12-month growth has averaged about 198,000 jobs which is probably above the long-run sustainable trend which would be closer to 125,000 – it’s unlikely that we would have continued to grow at 200,000 jobs a month,” he said. “At some point, the revision to the mean, to the trend long-term is bound to set in and as we know, they never converge smoothly. There’s always a dramatic move, and maybe this is it.”

Along with the jobs report is a packed calendar of speeches and appearances from Fed officials to round of the week.

In an interview with FOX Business’s Peter Barnes, Boston Federal Reserve Bank President Eric Rosengren, historically one of the central bank’s doves, said interest rates are likely to rise by the end of the year, thought they need to continue monitoring incoming data.

“Since August, not that much data has come out that would indicate that we have problems, but I think a little bit more data would be useful to make sure that some of the problems internally don’t’ have an impact on domestic data,” he said.

Later in the day, Fed Vice Chair Stanley Fischer will speak at the Boston Fed Conference at noon, while St. Louis Fed President James Bullard will give remarks at the Shadow Open Market Committee in New York at 1:00 p.m.

In recent action, the yield on the benchmark U.S. 10-year Treasury bond declined 0.044 percentage point to 2.00%. Fed Fund futures have pushed out expectations for the first rate hike until March on the back of the September employment report.

Elsewhere, in commodities, global oil prices also rebounded as U.S. crude prices settled 1.8% higher at $45.54 a barrel. Brent, the international benchmark, climbed 0.95% to $48.84.

Largely seen as a safe haven, metals were mostly higher with gold reversing course to trade up 2% to $1,135 a troy ounce while silver jumped 5.1% to $15.26 an ounce. Copper increased 1.3% to $2.33 a pound.

In currencies, the U.S. dollar was lower against a basket of global notes, while the euro jumped 0.22% against the greenback.

Equity markets in Europe also headed for a decline into the weekend. The Euro Stoxx 50, which tracks large-cap companies in the eurozone rose 0.62%, while the German Dax rose 0.46%, the French CAC 40 climbed 0.73%, while UK’s FTSE 100 gained 0.95%.

Asia markets were mixed with China markets closed for the holiday. Hong Kong’s Hang Seng surged 3.22%, while Japan’s Nikkei was flat.

On the corporate news front, Experian said a data breach announced on Thursday night might have compromised personal data of about 15 million consumers in the U.S. who applied for T-Mobile (NYSE:TMUS) subscriptions or devices over the last two years.

The Environmental Protection Agency is probing more than two dozen diesel car models made by automakers other than recently-embattled Volkswagen including BMW, Chrysler (NYSE:FCAU), GM (NYSE:GM), and Mercedes-Benz, according to the Financial Times.

After Congress averted a government shutdown on Wednesday night, lawmakers turn to the next fiscal fight: A battle over the debt ceiling. Treasury Secretary Jack Lew said the government could run out of money to pay its bills sooner than expected; he warned the government would have about $30 billion in cash around November 5.