US Futures Rise After Softer Economic Data

July was revised to a loss of 10,000 jobs. The prior report had shown a gain of 21,000 for that month. A month once counted as hiring became a month of jobs lost. Those revisions arrived with the September jobs report on Friday, and U.S. stock futures that had already advanced into the morning extended their gains once the labor figures hit the tape. Chipmakers and major technology names led the premarket bid.

Before the report, markets were already higher as investors anticipated slower hiring and weighed recent declines in bond yields. When the weaker labor data arrived, the futures did not fade. They pushed further as soft numbers sat on the tape and equities climbed anyway. The bid that had formed around cooler hiring only strengthened as the figures settled in. Broader futures held that firming tone.

The unemployment rate rose to 4.2 percent from 4.1 percent. Average hourly earnings increased just 0.1 percent from the month before. Economists had looked for a 0.3 percent rise. Over the full year, earnings were up 3 percent, short of the 3.3 percent forecast. Paychecks were barely moving even as the jobless rate edged higher. August payrolls were cut to 133,000 from the 162,000 first counted. Nonfarm payrolls rose by 29,000 in September. FactSet surveys had forecast roughly 90,000. The September change came in at less than a third of the expected gain.

Traders re-price growth expectations when earlier payroll prints shrink, and average hourly earnings carry similar weight: slower pay gains can ease the inflation pressure that builds when a tight labor market pushes wages higher. Softer wages, a higher unemployment rate, and two months of employment that looked thinner on second count framed the September release before the headline payroll change itself was set against the forecasts.

CME FedWatch showed the probability of an October Federal Reserve rate hike falling to roughly 21 to 23 percent, down from 64 percent a week earlier. Futures that had held their bid through the release now sat against a collapsed near-term tightening path, and equities re-priced with it.

Axel Rudolph, chief technical analyst at IG, tied the labor figures straight to the policy outlook. “The slowdown in job creation, combined with almost no increase in wages, suggests employment is becoming less of an inflationary threat and reduces the likelihood of further Fed rate hikes this year,” he said. The same softness carried a second reading. “While the weakness raises concerns about the health of the US economy, investors are focusing on the prospect that interest rates may not rise much further, giving equities a fresh boost.”

The 10-year Treasury yield fell briefly below 5.17 percent after the data, down from a peak near 5.35 percent on Thursday. The yield then partially rebounded through the day, settling near 5.25 to 5.28 percent.

Adam Schickling, senior economist at Vanguard, weighed the same figures against the path for policy. “This report strengthens the case for the Federal Reserve to remain patient,” he said. “The labor market has not deteriorated sharply, but there is also little evidence that it has meaningfully strengthened, giving policymakers reason to wait for additional data.”

Oil prices eased alongside the bond move. The Group of Seven agreed to release 100 million barrels of oil and diesel over four months. An EU proposal added 50 million barrels of diesel and 50 million barrels of crude from the International Energy Agency. West Texas Intermediate dropped 2.3 percent to $90.70. Softer yields and cheaper crude left the session open to the stock-by-stock turns still forming on the tape.

Nike shares slid in the premarket. The stock dropped roughly 5.8 percent, and in heavier prints as much as 10 percent, after a revenue miss and a cut to guidance. The sportswear company pointed to weakness in China. It also laid out plans for job cuts.

Tesla ran the opposite direction on the same tape. Shares climbed 5.5 percent after the company reported deliveries of 486,532 vehicles in the quarter, a total that beat estimates. The energy business grew 9.6 percent from a year earlier. Nvidia rose 1.9 percent and ranked as a top contributor to the S&P 500’s gains. Artificial-intelligence and chip names set much of the session’s equity leadership, the same technology bid that had already lifted the premarket.

The S&P 500 rose 0.7 percent to 7,724.38. The Dow Jones Industrial Average advanced 0.51 percent to 51,186.71. The Nasdaq Composite gained 1.19 percent to 27,191.33. Each of the three major averages finished the cash session higher. Despite Friday’s rebound, the S&P 500, the Dow, and the Nasdaq remained on track to finish the week lower for the broader averages.

Robert Bernstone, head of trading at SummitTX Capital, named the mood. “Cautious optimism is kind of where people are,” he said.