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U.S. stock-index futures edged higher on Sunday evening, October 4, as investors weighed a weaker-than-expected September jobs report and reduced expectations for another Federal Reserve rate increase this month. Gains were modest, however: elevated Treasury yields and oil prices continued to constrain the early move, according to Investing.com.
By 8:06 p.m. ET, S&P 500 futures were up 0.1% at 7,784, Nasdaq 100 futures had gained 0.3% to 31,148, and Dow futures were 0.1% higher at 51,513. The figures were an early indication, not a measure of where the indexes would finish Monday’s regular session.
September payroll growth fell short of forecasts
The Labor Department reported Friday that U.S. employers added 29,000 jobs in September, below the 90,000 increase expected by economists surveyed by Reuters. The unemployment rate was 4.2%, up from 4.1% in August, while the department revised August payroll growth down to 133,000 from 162,000.
The Bureau of Labor Statistics said employment changed little across major industries during September. Health care added 17,000 jobs, continuing its upward trend but below its average monthly increase over the previous year. Average hourly earnings rose five cents, or 0.1%, to $37.81; earnings were up 3.0% over 12 months.
The revisions also weakened the picture of recent hiring: July’s estimate was cut from a gain of 21,000 to a loss of 10,000, and August’s was reduced by 29,000. Together, employment in those two months was 60,000 lower than previously reported, the BLS said.
Rate expectations shifted after the report
The jobs figures prompted traders to scale back wagers on a rate increase at the Fed’s late-October meeting. Reuters reported that futures-market pricing put the probability of a hike of at least a quarter percentage point at 22.7% after the release, down from 64.2% a week earlier. Investing.com said markets were pricing roughly an 80% chance that rates would be left unchanged.
Those estimates are market-implied probabilities, not a commitment by policymakers. The Federal Open Market Committee’s next scheduled meeting is October 27–28, according to the Federal Reserve’s calendar. The employment report provides one input into the Fed’s decisions; it does not determine the outcome on its own.
The change in rate expectations followed a strong Friday session. The S&P 500 gained 0.7%, the Dow rose 0.5%, and the Nasdaq Composite advanced 1.2%, according to Reuters. The gains reflected a market response to both the jobs data and the possibility that a less heated economy could reduce near-term pressure for tighter monetary policy.
Bond yields and oil remain competing risks
The futures advance was restrained by concerns beyond employment. Treasury yields initially dropped after Friday’s report but later reversed higher, while oil prices remained elevated amid uncertainty over energy supplies and the conflict involving Iran, Investing.com reported. Higher yields can weigh on equities by raising borrowing costs and making future corporate earnings less valuable in present terms.
That leaves investors balancing two different implications of softer hiring. It may reduce the likelihood of an imminent Fed hike, a potential support for rate-sensitive shares, while also raising questions about the strength of the economy. The BLS’s preliminary figures showed payrolls had increased by an average of 45,000 a month over the preceding 12 months, and September’s gain was below that pace.
Investors await the next policy and economic signals
The Fed’s October 27–28 meeting is the next scheduled policy decision, with the committee’s assessment likely to depend on incoming evidence about employment, inflation and economic activity. The October employment report is scheduled for release on November 6, after that meeting, according to the BLS; it therefore will not be available to policymakers for the October decision.
For Monday’s trading, the Sunday futures levels offered only a preliminary signal. The opening and subsequent direction of U.S. equities could also reflect changes in bond yields, oil prices and other news as trading develops; the small overnight gains did not establish that the broader market had settled its concerns about inflation or the economic outlook.
