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Positive Labor Market Data Boosts US Equities
US equities rose slightly last week amid rising oil prices and a stronger-than-expected labor market update. Global equities (represented by the MSCI All Country World Index) were down -0.62% while domestic stocks (represented by the S&P 500 Index) were up 0.26%.
US Labor Market
The positive surprise of the week came from the US labor market data for September. The Labor Department reported 254,000 jobs added for the month, heavily surpassing consensus estimates of 140,000 and the strongest addition in six months. August’s figures were also revised higher by 17,000. The unemployment rate fell slightly to 4.1% from 4.2% in August. While the unemployment rate has ticked up from its January 2023 low of 3.4%, it still sits below historical averages. The chart below also shows how the increase in the unemployment rate has primarily been attributed to a growing labor supply rather than a decline in employment.
US Treasury Rate
The strong jobs report news sent treasury rates higher as it tamed investors’ expectations of the aggressiveness of the Fed’s rate-cutting path. The US 10-year treasury rate rose to 3.98%, starting the week at 3.75%, while the 2-year surged to 3.93% from 3.55%. According to CME FedWatch, the probability of a 0.25% rate cut at the November FOMC meeting rose to over 97% on Friday from just 65% the week prior.
Equity Markets
Prior to Friday’s optimistic news, equity markets were mostly down to start the week amid rising tensions in the Middle East and a US eastern coast port worker strike. The geopolitical tensions following an Iranian missile strike in Israel and potential retaliation worries caused oil prices to rise. US crude oil prices sprang up about 9%, reaching levels from August but still below recent highs from July. A strike from the International Longshoremen’s Association (ILA) impacted many major ports across the eastern and Gulf coasts of the US. However, a tentative agreement was made Thursday evening delaying further walkout until January.
Looking Forward
This week the Consumer Price Index (CPI) report is scheduled for Thursday which will give insight into the extension of moderating inflation. August’s CPI came in at an annual rate of 2.5%, falling from the month prior’s 2.9% reading.
I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
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