Stocks closed little changed after we got the October jobs report that beat economists’ expectations on nearly every gauge of America’s labour market.
Despite the soft close, stocks earned a sixth-straight week of gains, marking the longest streak of the year.
First, the scoreboard:
- Dow: 17,884.55, +21.12, (0.12%)
- S&P 500: 2,095.90, -4.03, (-0.19%)
- Nasdaq: 5,139.65, +11.91, (0.23%)
And now, Friday’s top stories:
- The US labour market expanded at the fastest pace this year in October, as 271,000 jobs were added. The unemployment rate fell from 5.1% to 5%, the lowest level since 2008. And, wages grew at the fastest pace in six years, as average hourly earnings rose 0.4% month-on-month, and 2.5% year-on-year. The data had been expected to show a rise in the pace of jobs growth, after the prior two jobs reports came in under expectations.
- These data have boosted markets’ confidence that the Federal Reserve could raise interest rates for the first time in nine years next month. “The reasons for Fed caution and delay are falling to the wayside as this economic expansion is the real deal,” wrote MUFG Union Bank’s Chris Rupkey in a client note. “Liftoff is coming in December. Bet on it. Savers, your long national nightmare is over. Rates on money in the bank are going up.”
- The rates market also reflected increased conviction in a rate hike next month. The yield on the two-year treasury note rose to 0.826%, a level it has not reached since 2010. Other short-term note yields sensitive to near-term rate expectations rose. And, Fed fund futures reflected a 70% probability — the highest this year — of an increase in the Fed’s benchmark rate by 0.25%.
- And then, Barclays overturned its call for a 2016 hike. The firm said it assumed that the recent market volatility would last longer than it did. This, today’s jobs report, and more hawkish communication from the Fed, prompted the forecast change.
- But Nobel Laureate Paul Krugman thinks the Fed should sit tight. In a New York Times blog, Krugman noted that wage growth was still below pre-recession levels, and core inflation was under the Fed’s 2% target.
- Away from the jobs report, the US oil rig count fell for a 10th straight period this week. Driller Baker Hughes said oil rigs fell 6 to 572, as total rigs dropped by 4 to 771. Data also showed that the number of rigs in October was 791, 15% lower compared to a year ago.
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