The U.S. economy showcased its strength in September, adding 254,000 jobs, far exceeding the anticipated 140,000. This significant increase, coupled with a surprisingly lower unemployment rate and higher wage growth, sparked a premarket rally on Wall Street, signaling a healthy consumer spending outlook and potentially bolstering corporate earnings, particularly in the fourth quarter.
The strong labor data, however, presents a challenge for the Federal Reserve’s efforts to curb inflation. Higher wages could fuel consumer demand, putting upward pressure on prices and potentially hindering disinflation efforts. This may lead the Fed to delay or reconsider anticipated interest rate cuts. Before the jobs report, the market had priced in a 30% chance of a 50-basis-point rate cut in November. Following the data release, those odds plummeted to 11%.
The market reacted positively to the news, with the SPDR S&P 500 ETF Trust (SPY) surging 0.9% in premarket trading, nearing its recent record highs. The Invesco QQQ Trust (QQQ), tracking major tech stocks, rallied 1.4%, driven by strong gains in the semiconductor sector. The iShares Semiconductor ETF (SOXX) soared 2.1%.
Blue chips also rose, with the SPDR Dow Jones Industrial Average ETF (DIA) gaining 0.7%. Small caps outperformed large caps, with the iShares Russell 2000 ETF (IWM) rallying 1.7%.
Yields on the 10-year Treasury bond climbed by 11 basis points to 3.96%, while yields on the policy-sensitive two-year note spiked by 15 basis points to 3.87%. The iShares 20+ Year Treasury Bond ETF (TLT) dropped 1.2%. The U.S. Dollar Index, tracked by the Invesco DB USD Index Bullish Fund ETF (UUP), rose 0.7%.
Among U.S. mega-cap stocks, the top performers in the 30 minutes following the jobs data release included:
*
KLA Corp. (KLAC):
+3.18%*
Mitsubishi UFJ Financial Group (MUFG):
+3.18%*
Applied Materials Inc. (AMAT):
+2.10%*
Lam Research Corp. (LRCX):
+2.08%*
Advanced Micro Devices Inc. (AMD):
+1.92%*
ARM Holdings plc (ARM):
+1.91%*
Shopify Inc. (SHOP):
+1.67%*
Broadcom Inc. (AVGO):
+1.66%*
Adobe Inc. (ADBE):
+1.59%*
Bank of America Corp. (BAC):
+1.56%*
Texas Instruments Inc. (TXN):
+1.56%The strong jobs report paints a positive picture of the U.S. economy’s resilience, but it also presents a complex scenario for the Federal Reserve as it navigates the delicate balance of curbing inflation without stifling economic growth.
