U.S. stocks were trading higher Friday morning after a weaker-than-expected October jobs report sent Treasury yields lower.
Meanwhile, shares of Apple Inc. led Dow decliners after delivering soft guidance.
What’s happening
-
The Dow Jones Industrial Average
DJIA
was up 155 points, or 0.5% -
The S&P 500
SPX
rose 33 points, or 0.8%, to 4,351. -
The Nasdaq Composite
COMP
added 114 points, or 0.8%, to 13,409.
The Dow was on track for its strongest weekly gain since the week ended Oct. 28, 2022, while the S&P 500 and Nasdaq headed for their strongest weekly rises since November of last year.
What’s driving markets
The U.S. added a modest 150,000 new jobs in October in a sign of a cooling demand for labor, as higher interest rates take a bite out of the economy. Economists polled by The Wall Street Journal had forecast 170,000 jobs.
“The good news here is that the slowdown will likely keep the Fed on the sidelines going forward. 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,” said Brad McMillan, chief investment officer for Commonwealth Financial Network, in a note.
Stocks have been rejoicing as the long-end of the Treasury yield curve has rallied, with the yield on the 10-year Treasury
BX:TMUBMUSD10Y
sliding 21 basis points over three days through Thursday. The 10-year yield dropped a further 15.8 basis points Friday to trade near 4.511% following the jobs data.
See: 10 and 30 year Treasury yields head for biggest weekly drops since last November and March 2020
This week’s rally in stocks and bonds has come after the U.S. Treasury set plans for less debt issuance on the long end than anticipated, the Federal Reserve gave indications that it may have made the last interest-rate hike of the cycle, and some key economic reports came in softer than anticipated.
“For markets, the question on everyone’s mind over the last few days is if the correlated rally post Fed and refunding announcement will stick or if markets will revert to rejecting the current policy mix of loose fiscal and tight monetary. We maintain the view to push against the ‘glass half empty’ response to earnings season as sentiment, Fed calls, and year-end seasonals should provide support to the market,” said Alexandra Wilson-Elizondo, deputy chief investment officer of multi-asset solutions at Goldman Sachs Asset Management.
“That said, we have preferred relative value views over directional, favoring the broad index over high capex and leverage sectors like REITS and Utilities,” she wrote.
An ISM barometer of U.S. business conditions at service-oriented companies such as retailers and restaurants slowed in October to a five-month low of 51.8%, suggesting the economy has softened. The reading was below the 53.0% forecast of economists polled by The Wall Street Journal. The index recorded 53.6% in September.
Companies in focus
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