US stock futures fall after stronger-than-expected job reports

Wall Street stock futures fell on Friday after a closely watched jobs report indicated continued strong job growth in the world’s largest economy.

Contracts, which track the broad-scale S&P 500, fell 1.1 percent after data showed US employers added 263,000 jobs in September, compared with 315,000 in August but above the 250,000 figure reported by Reuters was expected by the economists surveyed.

The US Bureau of Labor Statistics report also showed that the unemployment rate unexpectedly fell to 3.5 percent from 3.7 percent a month earlier.

Investors have been scouring jobs reports for clues about the future direction of US monetary policy in recent months. The temperature in the labor market is seen as a key influence on Federal Reserve decision-making, with signs of resilience typically fueling expectations that the central bank will proceed with aggressive rate hikes.

“Today’s job number is a restrictive reading, with almost every element of the report moving in the wrong direction for the Fed,” said Seema Shah, chief global strategist at Principal Global Investors.

“Payrolls were broadly in line with expectations but important to this good news is bad news, period: Markets were hoping for a negative surprise today. Instead, the figure only confirms that the Fed will have to hike rates by 0.75 percent in November for the fourth consecutive month.”

Contracts, which track the tech-heavy Nasdaq 100, which is more sensitive to changes in interest rate expectations, fell 1.6 percent ahead of the New York opening bell.

In Europe, the regional stock gauge Stoxx Europe 600 fell 0.7 percent after the release of US jobs data.

Treasury bond prices also fell after Friday’s data release, with the yield on the 10-year US Treasury bond rising 0.06 percentage point to 3.88 percent. The UK 10-year yield rose 0.06 percentage point to 4.23 percent.

Average hourly wages in the US rose 0.3 percent month-on-month – in line with the previous month and economists’ forecasts.

“[This] is arguably the most relevant part of the payroll report for the markets as wage inflation is at the root of second-round effects, posing a risk of persistently elevated inflation,” analysts at ING said ahead of the release.

The jobs data followed other reports earlier this week that pointed to a slowdown in the US jobs market. Figures on Thursday showed that US initial jobless claims came in higher than expected for the week ended October 1st. A release on Tuesday showed job vacancies in the world’s largest economy fell in August.

The dollar rose 0.1 percent against a basket of six peers after the latest report.

“It’s too early to expect a turnaround at the Fed level,” said Gergely Majoros, a member of Carmignac’s investment committee, ahead of Friday’s data release. “The bar is set so high. We would need a weaker labor market, falling inflation, some stress in the market or some kind of accident. We’re not there yet.”

The pound traded flat against the dollar at $1.114 after falling in the previous two sessions. The currency remains well above the record low of $1.035 it fell to earlier last week after Chancellor Kwasi Kwarteng unveiled his “mini” budget on Sept. 23. US stock futures fall after stronger-than-expected job reports

Adam Bradshaw

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