U.S. stocks advanced Friday after a weaker-than-expected September jobs report reduced expectations for a Federal Reserve interest rate hike in October. The S&P 500 and Dow Jones Industrial Average still posted weekly declines, while Treasury yields remained volatile.
Traders sharply reduce rate hike odds
Market expectations for a Federal Reserve rate hike in October fell to 17% on Friday, down from 36% a week earlier, according to the CME FedWatch Tool. The shift followed the release of the September jobs report, which showed the economy added only 29,000 jobs, below the estimated 80,000. Traders also cited a cooler-than-expected inflation reading, with core personal consumption expenditures prices rising 3% in August, below the forecasted 3.3%.
Stocks rebound but weekly losses persist
Major indexes ended Friday higher, led by gains in the Nasdaq Composite (0.45% weekly gain) and tech shares. The S&P 500 closed at 7,722, down 0.27% for the week, while the Dow Jones Industrial Average fell 1.26% to 51,176. The Russell 2000, which tracks small-cap stocks sensitive to interest rates, slipped 0.16%. Treasury yields remained a key concern, with the 10-year note fluctuating around 5.24% after briefly exceeding 5.34% earlier in the week.
Labor market and inflation signals diverge
The September jobs report indicated a labor market that has yet to regain momentum heading into the fourth quarter. Deborah Saneman, CEO of workforce consulting firm Wurk, noted that companies typically increase hiring in September but appeared cautious amid broader economic uncertainty. Meanwhile, the Federal Reserve’s preferred inflation gauge showed signs of cooling, though policymakers have emphasized the need for sustained progress.
Fed policy meeting looms
The Federal Reserve is scheduled to announce its next interest rate decision on October 28, following a two-day policy meeting. While traders now see an October hike as unlikely, they still assign a greater than 75% chance of a rate increase in December, according to FedWatch. The central bank has raised interest rates multiple times in 2024 to combat inflation that has remained above the Fed’s target for five years.
Market volatility reflects uncertainty
The CBOE Volatility Index rose 2.96% for the week to 15.31, signaling investor expectations of continued market turbulence. Analysts suggest the mixed signals from labor and inflation data may lead the Fed to adopt a more cautious approach in the coming months.