US stocks traded higher on Friday morning as government data showed US employers unexpectedly eliminated 23,000 jobs last month, according to Business-Today. The weaker-than-expected employment report boosted expectations that the Federal Reserve could have more room before increasing interest rates to curb inflation. By 9:55 a.m. Eastern time, the S&P 500 advanced 0.4%, the Dow Jones Industrial Average gained 114 points, or 0.2%, and the Nasdaq composite climbed 1%, with all three major indexes headed for weekly gains.
Market Moves
Large-cap technology companies provided much of the market's upward momentum, reflecting their significant influence on the broader indexes, according to an AP report cited by Business-Today. Nvidia rose 1.3%, while Broadcom added 1.1%. The S&P 500 remained close to the record high it reached on Tuesday. European equity markets traded higher, while Asian markets finished the session with mixed performances, Business-Today reported.
| Instrument | Latest reading | Prior level |
|---|---|---|
| S&P 500 | +0.4% | — |
| Dow Jones Industrial Average | +114 points (+0.2%) | — |
| Nasdaq composite | +1.0% | — |
| 10-year Treasury yield | 4.63% | 4.67% |
| 2-year Treasury yield | 4.19% | 4.22% |
| Brent crude | $82.07 a barrel (−0.6%) | — |
Bond Market Reaction
The response in the bond market was more pronounced, Business-Today reported, as the weaker-than-expected employment report strengthened expectations that the Fed could have more room before increasing rates. The yield on the benchmark 10-year Treasury note declined to 4.63% from 4.67% immediately before the employment data was released. The two-year Treasury yield, which is more sensitive to expectations surrounding Federal Reserve policy, fell to 4.19% from 4.22%.
Labour Market: A Weaker Picture
Taken together, the latest employment figures suggest a weaker labour market than previously believed, Business-Today reported. Until now, hiring had been one of the stronger parts of the economy despite rising inflation and growing concerns over household spending. The report also included downward revisions to payroll data for May and June, reducing employment by a combined 103,000 jobs.
Higher interest rates are used to slow economic activity and ease inflationary pressures. At the same time, increasing borrowing costs can place additional strain on a weakening labour market by making it more difficult for businesses to expand.
Federal Reserve Policy Crossroads
The Federal Reserve has kept interest rates unchanged because of concerns that inflation could remain elevated, particularly after oil prices climbed following the US war with Iran, Business-Today reported. Investors on Wall Street continue to expect at least one interest rate increase before the end of the year. However, signs of a softer labour market complicate the Fed's task of balancing inflation control with support for employment.
Business Implications
Businesses and financial markets generally favour lower interest rates because cheaper borrowing can encourage investment, according to the report. While that could provide support to a slowing labour market, it also risks adding to inflation that has already proved difficult to bring down. The report also noted that higher interest rates can place additional strain on a weakening labour market by making it more difficult for businesses to expand. Oil prices moved slightly lower, with Brent crude, the international benchmark, slipping 0.6% to $82.07 a barrel.
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