U.S. stock index futures moved lower on Friday after August employment data showed job growth exceeding expectations, prompting investors to reassess the outlook for Federal Reserve interest rates.
Nonfarm payroll employment increased by 162,000 jobs in August after an upwardly revised gain of 21,000 in July, according to the Labor Department. Economists had expected an increase of 55,000 jobs, compared with the previously reported July decline of 23,000.
The unemployment rate remained at 4.1% in August, unchanged from July and below expectations for an increase to 4.2%.
Treasury yields rose following the report as markets considered whether the employment figures could affect the Federal Reserve’s decision at its September policy meeting.
“Constantly changing interest rate expectations have kept investors on their toes this week,” said Dan Coatsworth, head of markets at AJ Bell.
Fed Rate Expectations Shift Following Jobs Report
Before the employment figures were released, expectations for a September rate increase had declined following comments from Federal Reserve Governor Christopher Waller.
CME Group’s FedWatch Tool indicated a 52.4% probability of a quarter-point rate increase, down from 63.2% on Wednesday.
Waller told Reuters that he was leaning towards keeping interest rates unchanged at the upcoming meeting. He said he would be “inclined to support” leaving rates unchanged if economic data over the following two weeks continued to show “some signs of disinflation.”
Those comments had contributed to lower Treasury yields and supported U.S. equities during Thursday’s session.
Wall Street Rallies Ahead of Employment Data
U.S. stocks recorded broad gains on Thursday, extending their rebound from the previous session.
The Dow Jones Industrial Average rose 624.16 points, or 1.2%, to 53,686.11. The Nasdaq Composite gained 366.23 points, or 1.4%, to 26,584.06, while the S&P 500 advanced 81.11 points, or 1.1%, to 7,747.71.
Gold-related equities also moved higher, with the NYSE Arca Gold Bugs Index gaining 3.8%. The NYSE Arca Broker/Dealer Index rose 3.5%, while the Dow Jones U.S. Software Index advanced 3.2%.
Snowflake Gains Following Quarterly Results
Snowflake (NYSE:SNOW) was among the notable individual movers, rising 16.6% after the software company reported fiscal second-quarter results that exceeded expectations and issued higher guidance.
Computer hardware and banking stocks also advanced during Thursday’s session, while oil services shares moved lower.
Friday’s stronger-than-expected employment report shifted attention back towards the outlook for interest rates as investors assessed the implications of the labour market data for the Federal Reserve’s September meeting.