US Jobs Data Cuts Rate Hike Bets Boosting Wall Street

The US labor market showed signs of cooling in September, with job additions falling far short of expectations and previous months' figures being revised downward. The US Labor Department reported that nonfarm payrolls grew at a slower pace than forecasted, while the unemployment rate ticked higher and average hourly earnings growth slowed significantly. This data suggested a labor market that is easing without collapsing, which is seen as a positive for inflation control but a potential concern for consumer spending and corporate earnings.

Markets reacted positively to the weaker-than-expected jobs report, with traders sharply reducing bets on an October Federal Reserve rate hike. The probability of a rate increase fell to less than a quarter, down from a majority just a week earlier. This shift supported equities, particularly rate-sensitive sectors like real estate and small-cap stocks, which recorded their best day in a month.

Despite Friday's gains, the broad US benchmark and the Dow ended the week lower, marking another weekly decline in a series of soft weeks since the August peak. Long-dated Treasury yields remained elevated, indicating that bond markets are not yet convinced that the inflation fight is over. The Nasdaq was the exception, posting another weekly gain, led by mega-cap names like Nvidia and Tesla.

For Australian investors, BlackRock's iShares US large-cap fund began the week on a firmer footing, benefiting from Wall Street's rebound. However, the fund's returns are also influenced by the AUD/USD exchange rate, which has added to gains this year as the Australian dollar weakened. The fund tracks Wall Street's broad large-cap benchmark, with technology being the largest sector, followed by financials, healthcare, and consumer services.