Stocks jump, dollar and yields drop after US jobs market softens

By Caroline Valetkevitch

NEW YORK (Reuters) – Global stock indexes rose sharply, the U.S. dollar dropped to a six-week low and benchmark 10-year U.S. Treasury yields fell to five-week lows on Friday after data showed U.S. job growth slowed more than expected in October.

The job growth slowdown underscored views that the Federal Reserve may be done hiking interest rates.

Also, U.S. two-year yields were the lowest since early September after the data, which showed U.S. job growth slowed in part as strikes by the United Auto Workers union against Detroit’s “Big Three” carmakers depressed manufacturing payrolls.

The data also showed the increase in annual wages was the smallest in nearly 2-1/2 years, pointing to an easing in labor market conditions.

“The good news here is that the slowdown will likely keep the Fed on the sidelines going forward,” said Brad McMillan, chief investment officer for Commonwealth Financial Network in Waltham, Massachusetts.

“One of their key concerns has been an overheated economy, especially after last quarter’s GDP growth, and this suggests that problem is going away.”

Wednesday’s U.S. central bank decision to leave rates unchanged and comments by Fed Chair Jerome Powell indicated to some investors that the Fed may be done raising rates. The Bank of England on Thursday also left rates unchanged.

Central bank officials however stressed that more may need to be done to tackle inflation.

Traders are now pricing in only a 5% chance of a Fed rate hike in December, down from 20% on Thursday, while the odds of a January increase have slipped to 11% from 28%, according to the CME Group’s FedWatch Tool.

Benchmark 10-year yields fell as low as 4.484%, the lowest since Sept. 26. Two-year note yields reached 4.807%, the lowest since Sept. 1.

A decision on Wednesday by the U.S. Treasury to issue less long-term debt than expected also fuelled the rally in bonds, as did data on Thursday suggesting the U.S. economy might finally be cooling.

The Dow Jones Industrial Average rose 222.24 points, or 0.66%, to 34,061.32, the S&P 500 gained 40.56 points, or 0.94%, to 4,358.34 and the Nasdaq Composite added 184.09 points, or 1.38%, to 13,478.28.

Bucking the trend of the broader market, Apple shares fell 0.5%, a day after the company reported quarterly results and warned of a dull holiday quarter.

The three major U.S. stock indexes also posted gains for the week, with the S&P 500 registering its biggest weekly percentage jump since November 2022.

The pan-European STOXX 600 index rose 0.17% and MSCI’s gauge of stocks across the globe gained 1.18%. The MSCI index was up 5.3% for the week, also the biggest weekly percentage increase since November 2022.

The U.S. dollar index dropped to a six-week low after the jobs data. In afternoon trading, the dollar index fell 1.111%, with the euro up 1.07% to $1.0734.

The Japanese yen strengthened 0.72% versus the greenback at 149.31 per dollar, while sterling was last trading at $1.2379, up 1.46% on the day.

In commodities, oil prices ended more than 2% lower, with the geopolitical risk premium waning.

Brent crude futures settled at $84.89 a barrel, while U.S. crude futures settled at $80.51.

Spot gold added 0.4% to $1,994.31 an ounce.

(Reporting by Caroline Valetkevitch in New York; additional reporting by Harry Robertson in London and Chibuike Oguh in New York; editing by Jacqueline Wong, Miral Fahmy, Alison Williams, Mark Heinrich, Rod Nickel and Diane Craft)