Wall Street stocks rallied after a warmer-than-expected jobs report

Wall Street stocks rallied after a warmer-than-expected jobs report

U.S. stocks rallied and the dollar weakened on Friday after a key report showed the economy added more jobs than forecast last month, adding to pressure on the Federal Reserve to maintain its aggressive stance on inflation.

The blue chip S&P 500 jumped 0.9 percent, while the tech-heavy Nasdaq Composite gained 0.6 percent. In Europe, the regional Stoxx Europe 600 added 2.3 percent, recovering from the 0.9 percent loss it made in the previous session.

The US dollar index, which tracks the currency against six major rivals, fell 1.5 percent. The move followed comments from US central bankers Thomas Barkin and Susan Collins, who implied the Fed was close to slowing the pace at which it raises borrowing costs.

The US added 261,000 jobs in October, according to the Labor Department, ahead of the consensus estimate of 200,000 compiled by Bloomberg. The unemployment rate rose by 0.2 percentage points to 3.7 percent in October, higher than the forecast of 3.6 percent.

Meanwhile, wages rose 0.4 percent from the previous month, the report showed – more than the 0.3 percent increase forecast.

Antoine Bouvet, senior rate strategist at ING, said Fed Chairman Jay Powell is a “hawkish turn” earlier in the week it makes sense given how high inflation remains, and Friday’s jobs data provides further justification: “That’s the icing on the cake.”

But Quincy Krosby, chief global strategist at LPL Financial, said the jobs report strengthened the case for a smaller 0.5 percentage point increase at the Fed’s December meeting and “helped the stock market” as higher numbers of unemployment imply that the number of payrolls is “moving lower, but not collapsing”.

On Wednesday, the Fed implemented its fourth consecutive rate hike of 0.75 percentage points in an attempt to bring inflation down to its 2 percent target. Powell’s warning that recent data suggested “the ultimate level of interest rates will be higher than expected” sent U.S. stocks lower and led to a sharp jump in U.S. short-term government bond yields.

The yield on the two-year Treasury, which is particularly sensitive to short-term expectations of monetary policy, retreated from a peak on Thursday, when it hit its highest level since mid-2007. The yield on the bond fell 0.02 percentage points to 4.68 percent on Friday. Yields rise when prices fall.

The yield on the 10-year US Treasury rose 0.03 percentage points to 4.15 percent. Long-term debt typically yields more than short-term notes, and so-called yield curve inversions have preceded every U.S. recession in the past 50 years.

Chinese stocks jumped, extending their weekly gains on hopes Beijing will reverse its long-standing zero-Covid policy. The CSI 300 index of shares listed in Shanghai and Shenzhen gained 3.3 percent.

It also fueled gains for mining groups Anglo American, up 7.4 percent, and Rio Tinto, up 8.2 percent in London. The FTSE 100 rose 2.3 percent.

Reports that US regulators completed their review of Chinese audit reports earlier than expected added to investor optimism about Chinese stocks, with Hong Kong’s Hang Seng rising 5.4 percent.

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