Market Snapshot: Dow struggles for direction with tech stocks under pressure as 10-year Treasury touches 1.60% after September jobs report

What’s driving the market?

Stocks were trading on either side of breakven in bumpy trade on Friday as investors struggled to coalesce around a clear theme for markets after data showed the U.S. economy created far fewer jobs than had been expected in September.

The question now is whether employment gains are sufficient to keep the Federal Reserve on track to scale back monetary policy stimulus, but a rise in Treasury yields suggests that fixed-income participants are inclined to belief that September’s headline figures won’t derail the central bank’s plans of starting to unwind its easy money policies before the end of the year.

Nonfarm payrolls rose by just 194,000 in the month, compared with the Dow Jones estimate of 500,000, the Labor Department reported Friday. However, the unemployment rate fell to 4.8%, versus expectations for 5.1%, and August’s report was raised 366,000 from 235,000.

“The script didn’t play out as projected today with nonfarm payrolls falling short of market expectations as only 194,000 new jobs added to the economy,” wrote Charlie Ripley, senior investment strategist at Allianz Investment Management, in emailed comments.

“However, looking behind the curtains, the details point to tighter labor conditions than the headline data suggests. With wages increasing to 4.6% on an annualized basis and the unemployment rate dropping to 4.8% it appears that labor conditions are fairly tight given the current amount of job openings in the economy,” the Allianz analyst wrote.

“The most interesting part of today’s employment data, and much of the other economic and corporate data seen recently, is that it is the supply of resources (such as labor) that is creating pricing pressure in the system, as well as consequently dulling the growth of an economy not lacking demand in virtually any area, wrote Rick Rieder, BlackRock’s chief investment officer of global fixed income and head of the firm’s global allocation investment team, in a Friday report.

The spread this summer of the coronavirus delta variant likely discouraged job seekers in September, despite many companies being desperate to hire, economists and business leaders say.

The labor market remains depleted after last year’s recession and job growth was stronger earlier this year. In the first seven months of 2021, the economy added an average 636,000 jobs a month.

Rieder said that it is unusual for supply side issues to create a rise in inflation which which creates a problem for Fed Chairman Jerome Powell.

“And importantly, the Federal Reserve is largely without utility in influencing supply. Hence, the Fed probably will (and should) continue its plan to taper excessive liquidity-accommodation in the very near future,” the BlackRock executive wrote.

The bond market appeared to be taking bearish cues from the labor-market report, with the benchmark 10-year Treasury note
TMUBMUSD10Y,
1.605%
adding to yield highs not seen since early June and breaching a significant rate at 1.60%.

There is still some debate among analysts who believe that the weak headline jobs reading might still give Powell & Co. cause to pause.

“This jobs number could call into question the starting point for taper late this year,” said Jamie Cox, Managing Partner for Harris Financial Group in Richmond, Va., “There are lots of positives in the report, like an uptick in average hourly earnings, but not enough to sugar coat the fact the employment picture remains murky with all the Covid related cross currents.”

Meanwhile, Washington avoided an unprecedented federal default after the Senate voted late Thursday to raise the government’s debt ceiling into December. The reprieve is temporary as lawmakers must head back to the bargaining table before the end of the year.

Optimism around a deal was enough to rally stocks, but that faded by Friday as investors took to the sidelines ahead of September payrolls data.

Which companies are in focus?

• Camber Energy Inc. CEI remained the hottest name on Wall Street, as the oil-and-gas company’s stock is once again the most actively traded on major U.S. exchanges ahead of Friday’s open as the recent roller-coaster ride looked set to continue. Shares of Camber were down 5.7%.

• Shares of ChemoCentryx Inc. CCXI soared 78% on Friday after the company said that it had received approval from the Food and Drug Administration for its Anca-associated vasculitis therapy.

• Sam’s Club, the Walmart Inc. WMT warehouse shopping club, announced its holiday plans on Friday, which include the launch of a direct-to-home wine delivery service. Walmart shares were up 0.2%.

• U.S.-listed shares of AstraZeneca AZN gained 0.4% on Friday after the company said an experimental asthma drug it is developing with Amgen AMGN has been given an orphan drug designation as a treatment for eosinophilic esophagitis, a rare inflammatory disease. Amgen’s shares were flat.

How are other assets trading?

• The U.S. oil benchmark 
  CL00,
  +1.14%

  BRNX21
  was up over 1% tapping highs above $80 a barrel, and headed for its seventh-straight weekly gain, with the contract up 4.7% for the week. Gold futures 
  GC00,
  -0.09%
   were down less than 0.1% at $1,758.80 an ounce and on track to end the week flat.

• The ICE U.S. Dollar Index 
  DXY,
  -0.04%,
   a measure of the currency against a basket of six major rivals, was trading 0.1% lower to end the week but maintaining a roughly 0.1% weekly gain.

• In European equities trade, the Stoxx Europe 600 
  SXXP,
  -0.28%
  closed 0.3% on Friday, but notched a 1% gain, and London’s FTSE 100 UKX rose 0.3%, also logging a 1% weekly advance.

• China’s CSI 300 index
  000300,
  +1.31%
  rose 1.3% as markets returned from a multiday holiday. China’s Shanghai Composite
  SHCOMP,
  +0.67%
  closed 0.7% higher. Meanwhile, Japan’s Nikkei 225 
  NIK,
  +1.34%
  gained 1.3% on Friday, helping to mitigate a 2.5% weekly decline.