Stock Market Update

[BRIEFING.COM] The stock market closed the week with solid gains, which led the Dow Jones Industrial Average to a fresh all-time high. Market participants were responding to this morning's release of the September Employment Situation Report. 

The report showed stronger than expected hiring, a drop in unemployment, and a rise in average hourly earnings. This was consistent with the market's soft landing narrative, which led to a recalibration in rate cut expectations due to the notion that the Fed won't have to act as aggressive going forward compared to the September meeting.

The likelihood of a 50 basis points rate cut at the November FOMC meeting dropped to 0.0% from 32.1% yesterday and 53.3% a week ago, according to the CME FedWatch Tool. 

Treasury yields shot higher in response to the data. The 10-yr yield settled 13 basis points higher at 3.98% and the 2-yr yield settled 22 basis points higher at 3.93%.

The jump in rates didn't deter buying in the stock market, which was also related to buy-the-dip interest after this week's losses. The three major indices settled slightly higher for the week thanks to today's move higher. The market-cap weighted S&P 500 rose 0.9% and the equal-weighted S&P 500 jumped 0.8%. 

Gains in the semiconductor space and mega cap stocks provided some support to the broader market. The Vanguard Mega Cap Growth ETF (MGK) jumped 1.1% and the PHLX Semiconductor Index (SOX) settled 1.6% higher.

Two S&P 500 sectors closed lower, clipped by rising market rates, and five sectors closed at least 1.0% higher. The financial (+1.6%) and consumer discretionary (+1.6%) sectors closed higher while the real estate (-0.7%) sector logged the biggest decline.

• Nasdaq Composite: +20.8% YTD
• S&P 500: +20.6% YTD
• Dow Jones Industrial Average: +12.4% YTD
• S&P Midcap 400: +12.1% YTD
• Russell 2000: +9.2% YTD

Reviewing today's economic data:

• September Nonfarm Payrolls 254K (Briefing.com consensus 135K); Prior was revised to 159K from 142K, September Nonfarm Private Payrolls 223K (Briefing.com consensus 125K); Prior was revised to 114K from 118K, September Avg. Hourly Earnings 0.4% (Briefing.com consensus 0.3%); Prior was revised to 0.5% from 0.4%, September Unemployment Rate 4.1% (Briefing.com consensus 4.2%); Prior 4.2%, September Average Workweek 34.2 (Briefing.com consensus 34.3); Prior 34.3
  • The key takeaway from the report is that the labor market is in a solid position to keep the U.S. economy on a growth trajectory.