Stocks Rise as Weaker Jobs Data Reduces Rate Hike Expectations

The major stock indexes rose on Friday as expectations for a Federal Reserve interest rate increase in October fell after softer-than-forecast US jobs data. The nonfarm payrolls increased by 29,000 jobs last month, short of the expected gain of 90,000 according to economists polled by Reuters. The Labor Department's closely watched employment report showed that job growth for August was revised down to 133,000 from a previously reported 162,000 surge.

The Fed's interest rate increase in October had already been declining going into Friday's jobs report. Two top policymakers said this week they wanted more data before deciding what to do next with interest rates. Odds of a December hike were last at around 86% probability, according to LSEG data.

Higher rates are often viewed as a negative for stocks because they increase borrowing costs for businesses and consumers. However, tempered expectations for an impending rate hike helped boost rate-sensitive stocks such as the S&P 500 real estate index, which gained 0.4%, and the small-cap Russell 2000 index, which gained 0.9% to register its biggest daily gain in a month.

The Nasdaq Composite was 1.2% higher, leading Wall Street, as it gained 319.27 points to 27,190.86. The Dow Jones Industrial Average rose 250.40 points, or 0.5%, to 51,176.96, the S&P 500 rose 56.27 points, or 0.7%, to 7,722.72.

The bond market resumed an ongoing selloff that has seen global yields rise to levels not seen in two decades. The yield on benchmark US 10-year notes was last up 4.72 basis points at 5.281%, while the 2-year note yield, which typically moves in step with interest rate expectations for the Fed, was up 3.98 bps at 4.827%.