U.S. stock futures rally ahead of Friday’s open after a weak September jobs report drives Treasury yields lower and cools Fed rate hike expectations.
Dow Jones, S&P 500 and Nasdaq index futures are currently pointing to a sharply higher open on Friday, with stocks poised to add to the modest gains posted in the previous session.
The futures saw a notable advance following the release of a closely watched Labor Department report showing much weaker-than-expected job growth in the month of September.
The report said non-farm payroll employment rose by 29,000 jobs in September after jumping by a downwardly revised 133,000 jobs in August, while economists had expected employment to increase by 85,000 jobs.
The Labor Department also said the unemployment rate ticked up to 4.2 percent in September from 4.1 percent in August. Economists had expected the unemployment rate to remain unchanged.
While the data may raise some concerns about the strength of the economy, the release has also contributed to a steep drop by treasury yields.
Following the slump seen in the previous session, the yield on the benchmark ten-year note is pulling back further off its highest levels in over twenty years.
The weaker than expected jobs data may also reduce the likelihood that the Federal Reserve will once again raise interest rates at its next meeting later this month.
According to CME Group’s FedWatch Tool, the chances the Fed will raise rates by another quarter point have plunged to just 13.8 percent.
A steep drop by the price of crude oil may also generate early buying interest, with U.S. crude oil futures plunging by more than 3 percent.
The sharp pullback by crude oil comes after a report from Reuters said European Union countries have discussed a French proposal to release diesel reserves in response to U.S. pressure to help cool surging fuel prices linked to the Iran war
Following the mixed performance seen during Wednesday’s session, stocks fluctuated over the course of the trading day on Thursday. The major averages bounced back and forth across the unchanged line before eventually closing modestly higher.
The S&P 500 rose 14.91 points or 0.2 percent to 7,666.45, while the Dow inched up 20.51 points or less than a tenth of a percent to 50,926.56 and the Nasdaq crept up 10.53 points or less than a tenth of a percent to 26,871.45.
The modestly higher close on Wall Street came as treasury yields showed a significant downturn after initially extending their recent upward trend.
The yield on the benchmark ten-year note slumped into negative territory after reaching its highest levels since April 2002.
However, traders seemed reluctant to make more significant moves ahead of the release of the Labor Department’s closely watched monthly jobs report.
A day ahead of the release of the monthly jobs report, the Labor Department released a report this morning showing first-time claims for U.S. unemployment benefits unexpectedly edged slightly lower in the week ended September 26th.
The Labor Department said initial jobless claims slipped to 197,000, a decrease of 1,000 from the previous week’s revised level of 198,000.
Economists had expected jobless claims to rise to 200,000 from the 197,000 originally reported for the previous week.
A sharp increase in crude oil prices also kept buying interest relatively subdued, with U.S. crude oil futures surging by more than 3 percent.
Oil producer stocks showed a substantial move to the upside amid the spike in the price of crude oil, driving the NYSE Arca Oil Index up by 3.1 percent.
Considerable strength was also visible among networking stocks, as reflected by the 2.5 percent surge by the NYSE Arca Computer Hardware Index.
Computer hardware, semiconductor and natural gas stocks also turned in strong performances, while biotechnology, healthcare and pharmaceutical stocks showed significant moves to the downside.