Market Overview
US equities closed significantly higher, with technology shares leading the rally, after a surprisingly weak September jobs report tempered expectations for an imminent Federal Reserve interest rate hike in October. This shift in sentiment is poised to influence the upcoming APAC open. However, relief in the US bond market proved temporary as longer-term Treasury yields rebounded by the session’s end, redirecting investor focus towards crucial inflation data. Meanwhile, oil prices experienced volatility amidst persistent geopolitical tensions in the Middle East and ongoing discussions regarding strategic fuel reserve releases.
Markets
On Wall Street, the S&P 500 (^GSPC) closed up 0.73% at 7,722.72, while the Nasdaq Composite (^IXIC) advanced 1.19% to 27,190.86, setting a new intraday record high. The Dow Jones Industrial Average (^DJI) also gained, finishing up 0.49% at 51,176.96.
In the bond market, the US 10-Year Treasury Yield (^TNX) finished the day higher at 5.277%, up 4.00 basis points. For the week, the 10-year yield was up 9.30 basis points. Australia’s 10-year yield was reported at 5.34%.
Commodity markets saw Brent Crude (BZ=F) close at $102.84 a barrel, a rise of 0.52%. WTI Crude (CL=F), however, closed down 1.63% at $91.36. Gold declined, with Gold (GC=F) ending down 0.85% at 4,166.70. Iron ore also fell 1.2% to $US91.40 a tonne.
In currency markets, the Australian Dollar (AUDUSD=X) traded at 0.6957, up 0.17% against the US dollar.
Looking ahead to the APAC session, ASX 200 futures are pointing to a positive open, up 24 points or 0.3% to 8744.
What Drove Markets
The primary catalyst for the US equity rally was a much weaker-than-expected September jobs report. The US economy added just 29,000 jobs, significantly missing the consensus estimate of 84,000 to 89,000. Furthermore, nonfarm employment figures for July and August were revised down by a combined 60,000 jobs, and the US unemployment rate edged modestly higher to 4.2% in September. This data led to a significant reduction in the perceived urgency for the Federal Reserve to tighten policy, with the probability of a quarter-point rate increase at the October 27-28 meeting falling to approximately 22.7 per cent, a notable drop from 64.2 per cent a week prior. Annual wage growth for private nonfarm payrolls ticked up 0.1% month-over-month and 3% year-over-year in September, marking the slowest annual increase since May 2021. Despite this, the Fed’s preferred inflation gauge, Core PCE, registered 3.4%, which remains above the central bank’s 2% annual target. Dallas Fed President Lorie Logan indicated that interest rates would need to rise by at least 50 basis points to curb price pressures. Fed Governor Lisa Cook warned that artificial intelligence-driven inflation poses a major risk for 2027, and Minneapolis Fed President Neel Kashkari expects more rate hikes will be needed to cap inflation going into 2027, though he was unsure about the timing of the next hike in October.
Despite initial relief, the bond market saw longer-term US Treasury yields rebound by the end of the session. The 10-year Treasury yield finished higher on the day and was up 9.30 basis points for the week, having reached “multi-decade highs” over the period. In contrast, the rate-sensitive 2-year yield fell 2.5 basis points over the week, aided by the paring of Fed policy tightening odds. Analysts cautioned that the jobs data alone might not fully shift the Fed’s focus away from inflation, with upcoming September CPI and PPI reports expected to be crucial. Concerns were also raised about a potential “stagflationary environment” given slowing growth and stubbornly high inflation.
Oil prices remained volatile. Brent crude prices closed higher amidst reports of additional US military deployments to the Middle East and the Trump administration signaling potential strikes on Iran. These geopolitical developments offset downward pressure from improving crude flows from the Middle East and the Group of Seven (G7) countries’ agreement to release as much as 100 million barrels of emergency stocks over the next four months. China’s decision to halt most refined fuel exports for October further adds to market complexity.
Stocks to Watch
Technology and growth stocks were prominent gainers following the jobs report. Tesla (TSLA) surged 4.65%, driven by better-than-expected third-quarter vehicle sales. Chipmakers also performed strongly, with Nvidia (NVDA) gaining 1.34% and hitting an intraday all-time high, while AMD (AMD) rose 2.95% to an all-time high. Cybersecurity firms CrowdStrike (CRWD) and Palo Alto Networks (PANW) saw gains of 1.48% and 1.76% respectively, both reaching all-time highs. Other notable tech sector advances included Broadcom (AVGO) up 3.35%, Alphabet (GOOG) rising 1.62%, Amazon (AMZN) gaining 1.33%, and Oracle (ORCL) adding 3.06%.
Conversely, Nike (NKE) slipped significantly, closing down 3.64% after reporting a quarterly top-line miss and issuing underwhelming guidance.