US close: Markets rally, erase early losses after jobs surge

(Sharecast News) - Stocks staged a surprising rally on Friday, quickly erasing early losses after non-farm payrolls figures blew forecasts out of the water. The Dow Jones Industrial Average finished up 0.9%, while the S&P 500 gained 1.2% and the Nasdaq jumped 1.6%.

According to the Department of Labor, non-farm payrolls surged by 336,000 last month, double what economists had pencilled in (170,000). What's more, that was on top of upwards revisions to figures for the previous two months by a combined 119,000.

The unemployment rate was unchanged on the prior month at 3.8%, slightly higher than the consensus estimate of 3.7%.

The initial reaction after the opening bell was a sudden drop in stocks and a surge in bond yields, but things quickly turned around as investors digested the details of the data - along with a barrage of analysts' comments.

"The resilience of the US labour market and economy is keeping pressure on the Fed to hike rates one last time this year and to keep rates higher for longer into 2024," said analysts at MUFG Bank in an email. "On the other hand the sharp move higher in US yields is contributing to a sharp tightening of financial conditions which reduces the need for another Fed hike."

The 10-year US Treasury yield was up 8.1 basis points at 4.789% by the close, well off its intraday high of 4.862%.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, noted how the National Federation of Independent Businesses' hiring intentions index continued to point towards private-sector payrolls growth of 175,000-200,000 over the next few months.

Shepherdson also noted that all of the net revisions to the July and August numbers were in the state and local education numbers, in part due to the seasonal adjustment factors, and said those seasonal anomalies were now corrected and would not repeat.

"For stocks to fully recover their former status, yields need to decline further, as implied by this week's stock market volatility," said Stephen Innes, managing partner at SPI Asset Management. "Alternatively, a significant upgrade in earnings expectations could propel stocks beyond their current wide-range trading pattern."

Exxon in M&A talks

Exxon Mobil was lower on reports it is close to sealing a $60bn takeover of Permian shale basin producer Pioneer Natural Resources. According to Reuters, citing people familiar with the matter, an agreement between the pair may well be struck in the coming days.

Tesla edged higher after slashing the price of Model 3 and Model Y cars in the aftermath of reporting lower-than-expected third-quarter deliveries.

US-listed shares of Philips dropped after the FDA criticised the group's handling of its sleep apnea product recall, and said it needs additional testing of the devices.

G1 Therapeutics and Apellis Pharmaceuticals were both reacting to ratings changes by JP Morgan. G1 was hit with a downgrade to 'underweight', while Apellis was lifted by an upgrade to 'neutral'.