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Beyond the Numbers

Futures Fluctuating Following Closely Watched Monthly Jobs Report
10/8/2021 9:01 AM

The major U.S. index futures have fluctuated following the release of the Labor Department’s closely watched monthly jobs report on Friday, pointing to choppy trading on Wall Street.

The Labor Department report showed much weaker than expected job growth in the month of September, although the unemployment rate fell to a new pandemic-era low.

The report said non-farm payroll employment rose by 194,000 jobs in September after climbing by an upwardly revised 366,000 jobs in August.

Economists had expected employment to jump by 500,000 jobs compared to the addition of 235,000 jobs originally reported for the previous month.

Despite the much weaker than expected job growth, the unemployment rate fell to 4.8 percent in September from 5.2 percent in August. The unemployment rate was expected to edge down to 5.1 percent.

With the bigger than expected decrease, the unemployment rate dropped to its lowest level since hitting 4.4 percent in March of 2020.

The data may lead to uncertainty about the outlook for monetary policy, as the Federal Reserve has indicated it needs to see further improvement in the labor market before scaling back stimulus.

“The disappointing 194,000 gain in non-farm payrolls in September probably still counts as ‘decent’ enough for the Fed to begin tapering its asset purchases next month,” said Andrew Hunter, Senior US Economist at Capital Economics.

He added, “But alongside signs that activity growth is slowing sharply, at the same time as worsening labor shortages are putting serious upward pressure on wage growth, it looks set to leave Fed officials in an uncomfortable position over the coming months.”

Stocks moved notably higher during trading on Thursday, extending the upward move seen over the course of Wednesday’s session. The major averages closed higher for the third consecutive session following the steep drop seen on Monday.

The major averages pulled back off their best levels in afternoon trading but remained firmly positive. The Dow jumped 337.95 points or 1 percent to 34,754.94, the Nasdaq surged up 152.10 points or 1.1 percent to 14,654.02 and the S&P 500 advanced 36.21 points or 0.8 percent to 4,399.76.

The rally on Wall Street came as lawmakers reached an agreement to temporarily extend the debt limit, avoiding a potential default.

Senate Majority Leader Chuck Schumer, D-N.Y., announced an agreement to extend the debt ceiling through early December.

The agreement would reportedly increase the debt limit by $480 billion, allowing the Treasury to continuing paying its bills through December 3rd.

While the temporary extension means the U.S. could face another debt crisis in just a few weeks, the news was still greeted positively by traders.

Adding to the positive sentiment, a report from the Labor Department showed a bigger than expected pullback in first-time claims for U.S. unemployment benefits in the week ended October 2nd.

The report said initial jobless claims fell to 326,000, a decrease of 38,000 from the previous week's revised level of 364,000.

Economists had expected jobless claims to dip to 348,000 from the 362,000 originally reported for the previous week.

The bigger than expected decrease came after jobless claims rose for three straight weeks, reaching their highest level since early August.

The release of the weekly jobless claims report came a day ahead of the release of the Labor Department's more closely watched monthly jobs report on Friday.

Economists currently expect employment to increase by 488,000 jobs in September after rising by 235,000 jobs in August. The unemployment rate is expected to dip to 5.1 percent from 5.2 percent.

Oil service stocks moved sharply higher over the course of the session, driving the Philadelphia Oil Service Index up by 3.3 percent. The strength among oil service stocks came amid a notable increase by the price of crude oil.

Significant strength was also visible among networking stocks, as reflected by the 2.3 percent jump by the NYSE Arca Networking Index.

Steel stocks also turned in a strong performance on the day, resulting in a 1.9 percent advance by the NYSE Arca Steel Index. The index rebounded after ending the previous session at a six-month closing low.

Brokerage, housing and computer hardware stocks also moved notably higher on the day, while airline stocks were among the few groups to buck the uptrend.

Commodity, Currency Markets

Crude oil futures are rising $0.74 to $79.04 a barrel after climbing $0.87 to $78.30 a barrel on Thursday. Meanwhile, after slipping $2.60 to $1,759.20 an ounce in the previous session, gold futures are jumping $17.30 to $1,776.50 an ounce.

On the currency front, the U.S. dollar is trading at 111.64 yen versus the 11.63 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1570 compared to yesterday’s $1.1552.

Asia

Asian stocks ended Friday's session mostly higher amid relieved concerns of a possible U.S. government default this month. Investors eyed key U.S. jobs data due out later in the day for any fresh insight into the timing of Federal Reserve tapering.

Chinese shares advanced as traders returned from a one-week holiday. The benchmark Shanghai Composite Index climbed 24.00 points, or 0.7 percent, to 3,592.17, while Hong Kong's Hang Seng index rose 136.12 points, or 0.6 percent, to 24,837.85.

As investors reel from Beijing's regulatory crackdown, People's Bank of China Governor Yi Gang said that regulators would continue to curb monopolistic behavior among internet platforms as well as strengthen consumer and data protection.

Japanese shares rose for a second day after a truce in the U.S. debt-ceiling standoff. The Nikkei 225 Index ended up 370.73 points, or 1.3 percent, at 28,048.94, after having jumped as much as 2.3 percent earlier in the day. For the week, the Nikkei fell 2.5 percent on concerns about slowing growth and inflation.

The broader Topix surged up 22.13 points, or 1.2 percent, to 1,961.85, closing higher for the first time in 10 sessions.

A weaker yen helped lift automakers, with Honda Motor rising 1.1 percent and Toyota Motor rallying 2.9 percent. Yaskawa Electric gained 0.8 percent before its earnings release.

In economic news, data on current account balance and household spending painted a mixed picture of the economy.

Australian markets rose notably as higher commodity prices lifted mining stocks. The benchmark S&P/ASX 200 Index advanced 63.40 points, or 0.9 percent, to 7,320.10, while the broader All Ordinaries Index ended up 66.10 points, or 0.9 percent, at 7,617.30.

BHP, Fortescue Metals Group, OZ Minerals and Rio Tinto climbed 2-4 percent. Energy and tech stocks also finished broadly higher.

Meanwhile, Seoul stocks edged lower as the possible collapse of one of China's biggest borrowers triggered worries about contagion risks to the property sector in the world's second-largest economy. The Kospi slipped 3.16 points, or 0.1 percent, to 2,956.30. SK Hynix dropped 1.8 percent on concerns over a slowdown in the memory market.

Europe

European stocks have moved to the downside on Friday as German exports data disappointed and traders digest the key U.S. payrolls data.

German exports decreased 1.2 percent month-on-month in August, in contrast to the 0.6 percent rise in July, Destatis reported. Economists had forecast monthly growth of 0.5 percent.

At the same time, imports rebounded 3.5 percent following a 3.6 percent drop in the previous month. As a result, the trade surplus declined to a seasonally adjusted 13.0 billion euros from 17.7 billion euros a month ago.

While the U.K.’s FTSE 100 Index is just below the unchanged line, the German DAX Index is down by 0.2 percent and the French CAC 40 Index is down by 0.4 percent.

Harbour Energy has soared after announcing it has priced its senior notes offering of $500 million aggregate principal amount of 5.50 percent senior notes due October 2026.

N Brown Group has also jumped. The online fashion and homeware retailer doubled half year profits during a strong six month period for its strategic brands.

Electronic parts distributor Electrocomponents has also moved to the upside after raising its full-year guidance.

Telecom Italia has also risen. The Italian telecommunications company and its unit Noovle have signed a partnership with business software maker Oracle to offer cloud services in Italy.

Travel stocks are mostly higher in London, with British-Airways owner IAG posting a strong gain after the government announced it will scrap tough COVID-19 quarantine requirements for 47 destinations.

However, TUI Group shares have plunged. The travel company unveiled plans to raise more than 1 billion euros in capital in order to help pay off more than substantial state-backed loans taken during the pandemic.

EssilorLuxottica S.A. shares have also moved lower in Paris after the company launched a recommended mandatory public offer for GrandVision shares.

U.S. Economic Reports

Employment in the U.S. increased by much less than expected in the month of September, according to a closely watched report released by the Labor Department on Friday.

The report said non-farm payroll employment rose by 194,000 jobs in September after climbing by an upwardly revised 366,000 jobs in August.

Economists had expected employment to jump by 500,000 jobs compared to the addition of 235,000 jobs originally reported for the previous month.

Despite the much weaker than expected job growth, the unemployment rate fell to 4.8 percent in September from 5.2 percent in August. The unemployment rate was expected to edge down to 5.1 percent.

At 10 am ET, the Commerce Department is scheduled to release its report on wholesale inventories in the month of August. Wholesale inventories are expected to jump by 1.2 percent.

Stocks In Focus

Shares of Vaxart (VXRT) are moving sharply higher in pre-market trading after a new study showed the biotechnology company’s investigational oral tablet vaccine reduced the airborne transmission of SARS-CoV-2 virus in an animal model.

Diagnostic healthcare products maker Quidel (QDEL) is also likely to see initial strength after forecasting third quarter revenues well above analyst estimates.

On the other hand, shares of Allogene Therapeutics (ALLO) are seeing substantial pre-market weakness after the FDA place a hold on the drug maker’s cancer drug trials following a report of a chromosomal abnormality in a patient.

Healthcare benefit solutions provider Accolade (ACCD) may also come under pressure after reporting a wider than expected fiscal second quarter loss and providing disappointing guidance.
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