Wall Street rises as job data supports the possibility of a lower rate hike

 Wall Street's main indexes rose on Friday as an increase in the United States' unemployment rate in October overshadowed statistics showing solid job growth and fueled hopes that the Federal Reserve will raise interest rates more gradually in the future.

Wall Street rises as job data supports the possibility of a lower rate hike
Wall Street rises as job data supports the possibility of a lower rate hike

The widely watched non-farm payrolls report from the United States Labor Department showed a jump in the unemployment rate to 3.7% last month from 3.5% in September, indicating some relaxation in labor market conditions that could give the Fed cover to pivot toward smaller rate rises next month.

It also indicated that average hourly wages gained 0.4% in October, versus a 0.3% projection, and that nonfarm payrolls increased by 261,000, versus 200,000 expected, after climbing 263,000 in September.

The report was a significant focal area for markets after Fed Chair Jerome Powell's hawkish comments on Wednesday fueled fears that the central bank would continue to raise borrowing prices for a longer period of time than previously anticipated.

"Powell should be thrilled that the unemployment rate increased from 3.6% to 3.7%; all Fed members want and expect unemployment to grow by at least a full percentage point," said Bryce Doty, senior portfolio manager at Sit Fixed Income Advisors.

The reading comes on the heels of a contradictory collection of statistics that, while pointing to a downturn in some areas of the economy, has also demonstrated the resilience of labor demand in the United States despite the Fed's aggressive policy actions to contain inflation.

"This is a step in the right way because it's the third month in a row of more modest hourly wages improvements," said Jason Pride, Glenmede's chief investment officer for private wealth in Philadelphia.

Traders' odds of a 75 basis point rate hike in December jumped to 64.5% after the data was released, but quickly fell back to about 60%.

The market's attention will now shift to a critical inflation report due next week, as well as the November 8 midterm elections in the United States, in which control of Congress is at stake.

Despite the early gains, the S&P 500 and the tech-heavy Nasdaq were on track for their first weekly fall in three weeks, on fears that the Fed would maintain its hawkish posture until it saw significant signs of pricing pressures easing and the labor market cooling.

Energy was among the S&P 500's top gainers, up 1.4%, as oil prices climbed and investors weighed the potential for a relaxation of China's COVID limitations.

Such expectations boosted U.S.-listed shares of Chinese companies such as Alibaba, JD.com, and Baidu by 2% to 5%.

Amazon.com and Alphabet gained 0.4% and 0.8%, respectively, in the megacap growth sector.

Meanwhile, the CBOE volatility index VIX, also known as Wall Street's fear gauge, has dropped to its lowest level since September 9.

The Dow Jones Industrial Average was up 236.10 points, or 0.74%, at 32,237.35, the S&P 500 was up 22.24 points, or 0.60%, at 3,742.13, and the Nasdaq Composite was up 29.32 points, or 0.28%, at 10,372.26 at 9:47 a.m. ET.

Starbucks Corp jumped 8.6% after exceeding Wall Street predictions for quarterly comparable sales and profit, while DoorDash Inc rose 8.6% after exceeding revenue expectations.

PayPal Holdings Inc dropped 6.0% after cutting its annual revenue growth outlook in anticipation of a broader economic slump.

On the NYSE, advancers outpaced decliners by a 3.43-to-1 ratio, while on the Nasdaq, advancers outnumbered decliners by a 1.51-to-1 ratio.

The S&P 500 index hit 14 new 52-week highs and 15 new lows, while the Nasdaq hit 40 new highs and 98 new lows.


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