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Hiring nearly stalls, and Wall Street cheers

The day in one line: US employers added just 29,000 jobs in September, far fewer than expected. Investors took it as a sign the Federal Reserve may not need to raise rates again soon, and stocks rose. Futures are slightly lower this morning.

What moved and why

1. A weak jobs report lifted stocks. On Friday the S&P 500 rose 56.27 points, or 0.73%, to 7,722.72. The Nasdaq gained 319.27 points, or 1.19%, to 27,190.86. The Dow rose 250.40 points, or 0.49%, to 51,176.96. Small companies joined in: the Russell 2000 rose 0.94% to 2,832.90. Even so, the S&P 500 ended the week down 0.3% and the Dow down 1.3%. The Nasdaq finished the week up 0.5%. This morning, S&P 500 futures are down about 0.1% and Nasdaq futures down about 0.2%.

2. The jobs numbers. The US added 29,000 jobs in September. Economists expected about 84,000 to 90,000. The unemployment rate rose to 4.2% from 4.1%. Average hourly pay rose just 0.1% in the month and 3.0% over the past year. Earlier months were also revised lower: July now shows a loss of 10,000 jobs, and August was cut to 133,000 from 162,000. Health care (+17,000), construction (+11,000) and manufacturing (+9,000) added jobs. Financial firms cut 7,000.

3. Why weak news helped. The Fed raised its key rate in September, its first hike since 2023. A cooling job market makes another hike less likely. After the report, the market-implied chance of a Fed hike at its October meeting fell from about 64% to about one in five, according to Yahoo Finance and TheStreet. Bond yields did not get much relief, though. The US 10-year Treasury yield ended Friday near 5.28%, close to its highest level since 2002.

4. Oil eased, and OPEC+ held steady. US crude (November) fell US$1.76 to US$91.11 a barrel on Friday. Early Monday it was a little lower, around US$90.20 to US$90.50. Brent, the global benchmark, closed Friday at about US$102.25 and edged up early Monday. Over the weekend, OPEC+ kept its output targets unchanged for November, the second month in a row. Group of Seven countries have released 100 million barrels from emergency stockpiles. The Strait of Hormuz, a key shipping route, has been closed since February 28 because of US-Iran fighting, according to The National.

5. Gold, gas and copper. December gold fell US$40 to US$4,162.30 an ounce on Friday, then rose about 0.65% to roughly US$4,189 early Monday. US natural gas is near US$3.03 per million BTU this morning, supported by forecasts of cooler weather in mid-October and strong export demand. Copper fell 1.1% on the London Metal Exchange on Thursday, to US$14,253.50 a tonne, with China's markets closed for the Golden Week holiday through October 7.

6. Company news: Tesla and Nvidia up, disk-drive makers down. Tesla rose about 5% after delivering 486,532 vehicles in the third quarter, about 25,000 more than analysts expected (and down about 2% from a year earlier, per Electrek). Rivian also beat estimates with 19,248 deliveries, but its shares fell about 3%. Nvidia hit a new intraday high of US$237.88, giving it a market value of about US$5.7 trillion; chip stocks broadly gained about 2%. Seagate fell about 14% and Western Digital about 12% after Toshiba said it plans to double its hard-drive capacity. Nike fell about 5% after its weak results on Thursday.

Canada corner

TSX snaps its losing streak. The S&P/TSX Composite rose 347.89 points, or 0.99%, to 35,502.65 on Friday. That ended a week of losses. Banks, tech, energy and rail stocks led. CIBC rose 1.1%, Scotiabank 0.7%, Shopify 1.8%, Canadian Natural 1.5% and Canadian Pacific Kansas City 1.9%. Enbridge slipped 0.35%. The index is still down about 3% over the past month but up about 16.5% over the past year.

The loonie stays weak. The Canadian dollar closed at 70.20 US cents, little changed from 70.21 the day before. That works out to about C$1.425 per US dollar. The loonie had fallen for eight straight sessions coming into Friday and is near an 18-month low. A strong US dollar, high US bond yields and Friday's drop in oil all weighed on it.

Canadian bonds. Canada's 10-year yield ended Friday at about 3.95%, up slightly on the day. That is more than 1.3 percentage points below the US 10-year. Higher US yields tend to pull money toward US dollars, which is one reason the loonie is soft.

Bank of Canada: three weeks to the decision. The key rate is 2.25%. Canada's economy was flat in July, and an early estimate shows 0.2% growth in August. Inflation was 3.0% in August. That mix of slow growth and above-target inflation makes the October 28 decision hard to call. Before then, the Bank releases its Business Outlook Survey on October 19.

Company watch: CPKC. Canadian Pacific Kansas City said it set new records for grain handling in September and in the third quarter. The shares rose 1.9% on Friday.

Coming up for Canada: September jobs on Friday. Economists expect about 9,500 new jobs and an unemployment rate of 6.5%, up from 6.4%. Markets are closed next Monday, October 12, for Thanksgiving.

One thing to understand: why bad news can be good news for stocks

On Friday, a weak jobs report pushed stocks up. That seems backward. The reason is interest rates. The Fed raised rates in September to fight inflation. Higher rates make borrowing more expensive and can hurt company profits. When the job market cools, the Fed has less reason to raise rates again. So investors read weak hiring as a sign that rates may stop rising. This works only up to a point. If job losses become large, investors start to worry about a recession, and bad news turns back into bad news for stocks.

On the calendar

Today (Monday, October 5)

Rest of the week

Sources

This newsletter is general information, not investment advice.

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