Dow Jumps 400 Points, Nasdaq Hits Record High After Jobs Report — BlackRock’s Rosenberg Calls Data ‘Dovish’

The September payroll expansion sharply missed expectations, with U.S. payrolls increasing by just 29,000, well below the 90,000 increase economists expected.

• The S&P 500 rose 0.9%, and the Nasdaq Composite gained 1.6% to hit record high after the September jobs report.
• Rosenberg said the Fed remains more focused on inflation than employment, with December “squarely in the mix.”
• The 10-year Treasury yield fell over 5 basis points to 5.176%, while the two-year yield dropped 3 basis points to 4.75%.

U.S. stocks jumped Friday with Nasdaq-100 hitting a fresh record high and Treasury yields falling after a surprisingly weak September jobs report reduced expectations of a Federal Reserve rate hike this month.

The Dow Jones Industrial Average climbed as much as 400 points, while the S&P 500 gained 0.9% and the Nasdaq Composite rose 1.6%, crossing the 31,000 level for the first time ever to hit an all-time high. The Invesco QQQ Trust ETF, which tracks the Nasdaq-100 index, also hit a new all-time high of around $754.

Technology shares led the rally, with Intel (INTC) and Advanced Micro Devices (AMD) each gaining more than 3%.

Treasury yields moved lower Friday, with the 10-year yield falling more than 5 basis points to 5.176% and the two-year yield down more than 3 basis points to 4.75%. Bond yields move inversely to prices.

Jobs Miss Cuts October Rate-Hike Expectations

The U.S. economy added 29,000 jobs in September, well below the 90,000 increase economists expected. The unemployment rate rose to 4.2% from 4.1%, while average hourly earnings increased just 0.1% from the previous month.

A softer labor market could influence how the Fed weighs the employment side of its dual mandate against persistent inflation, after policymakers raised rates in September to address price pressures that have remained above the central bank’s target.

Fed funds futures now imply an 82% chance the central bank leaves rates unchanged this month, up from about 76% a day earlier, according to the CME FedWatch Tool.

BlackRock’s Rosenberg Calls Jobs Report ‘Dovish’

Jeffrey Rosenberg, CFA, Managing Director at BlackRock, characterized the report as “dovish” and “a little softer across the board,” noting that a stronger reading could have added pressure on the Fed to continue raising rates.

October had already been “pretty much” taken off the table, he said in an interview with Bloomberg, while December remains “squarely in the mix.”

The Fed and bond market are currently driven much more by inflation than employment, Rosenberg said. He pointed to the next inflation report and the trajectory of oil prices, including distillates and refining margins, as key factors for the policy outlook.

An October hike would require a “pretty big inflation upside surprise,” particularly following recent softer inflation readings, the analyst said.

Meanwhile, Renaissance Macro Research’s Neil Dutta told Bloomberg that the Fed could still be one bad inflation print away from another increase and that he remains reluctant to fully embrace a dovish outlook.

Higher Yields Boost Bond Appeal

According to Rosenberg, the recent rise in interest rates has made prospective fixed-income returns more attractive even as falling bond prices have hurt existing holdings.

Combined with wider credit spreads, current yields are beginning to look more attractive for portfolio balance and diversification, he said.

On Stocktwits, retail sentiment for the SPDR S&P 500 ETF (SPY), an exchange-traded fund that tracks the S&P 500 Index, moved to ‘extremely bullish,’ and Invesco QQQ Trust (QQQ), improved to ‘extremely bullish’ from ‘bullish.’

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