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MARKET SNAPSHOT

U.S. stock indexes ended lower Friday, but still booked weekly gains, with technology stocks under pressure as bond yields rose after a monthly report on the labor market came in much weaker than expected.

However, the jobs report seems unlikely to delay Federal Reserve plans to announce a reduction of its bond purchases as the economy recovers from the pandemic.

How did major stock indexes trade?

  • The Dow Jones Industrial Average fell 8.69 points, or less than 0.1%, to close at 34,746.25.
  • The S&P 500 slipped 8.42 points, or 0.2%, to end at 4,391.34.
  • The tech-heavy Nasdaq Composite Index lost 74.48 points, or 0.5%, to finish at 14,579.54.

On Thursday, the Dow rose 338 points, or 0.98%, to 34,755, the S&P 500 increased 36 points, or 0.83%, to 4,400, and the Nasdaq Composite gained 152 points, or 1.05%, to 14,654.

For the week, the Dow gained 1.2%, its largest percent gain since June 25, according to Dow Jones Market Data. The S&P 500 rose 0.8% and the Nasdaq gained 0.1%.

What drove the market?

Stocks wavered in bumpy trade Friday, as investors struggled to coalesce around a clear theme for markets after labor data showed the U.S. economy created far fewer jobs than had been expected in September.

The question now is whether employment gains are sufficient to keep the Federal Reserve on track to scale back monetary policy stimulus. A rise in Treasury yields suggests that fixed-income participants anticipate that September’s headline figures won’t derail the central bank’s plans of starting to unwind its easy money policies before the end of the year.

Nonfarm payrolls rose by just 194,000 in the month, compared with the Dow Jones estimate of 500,000, the Labor Department reported Friday. However, the unemployment rate fell to 4.8%, versus expectations for 5.1%, and August’s report was raised 366,000 from 235,000.

Tony Roth, chief investment officer of Wilmington Trust, told MarketWatch Friday that he sees “very little” in the jobs report that changes “the Fed’s need to start to taper” this year. The job market is “going in the right direction,” with the unemployment rate dropping, while the rise in wages adds to some investors’ concerns that elevated inflation may not be temporary, Roth said by phone.

Read: Wall Street gets ready for the Federal Reserve to pull trigger on tapering, despite ‘unusual situation’ in U.S. economy

“Looking behind the curtains, the details point to tighter labor conditions than the headline data suggests,” wrote Charlie Ripley, senior investment strategist at Allianz Investment Management, in emailed comments. “With wages increasing to 4.6% on an annualized basis and the unemployment rate dropping to 4.8% it appears that labor conditions are fairly tight given the current amount of job openings in the economy.”

The miss on jobs is tied to the supply of workers, creating a “confusing” dynamic for the market as it’s hard to know how permanent labor shortages may be as the economy continues its recovery from the pandemic, according to Roth. The Fed needs to complete tapering before it begins raising interest rates, with rate hikes being a tool to keep inflation from getting out of control, he said.

The spread this summer of the coronavirus delta variant likely discouraged job seekers in September, despite many companies being desperate to hire, economists and business leaders say.

The labor market remains depleted after last year’s recession and job growth was stronger earlier this year. In the first seven months of 2021, the economy added an average 636,000 jobs a month.

The bond market appeared to be taking bearish cues from the labor-market report, with the benchmark 10-year Treasury note adding to yield highs not seen since early June and breaching a significant rate at 1.6%.

There still is some debate among analysts who believe that the weak headline jobs reading might still give Powell & Co. cause to pause.

“This jobs number could call into question the starting point for taper late this year,” said Jamie Cox, managing partner for Harris Financial Group in Richmond, Va. “There are lots of positives in the report, like an uptick in average hourly earnings, but not enough to sugar coat the fact the employment picture remains murky with all the COVID related cross currents.”

In Washington, an unprecedented federal default was avoided this week after the Senate voted late Thursday to raise the government’s debt ceiling into December. The reprieve is temporary as lawmakers must head back to the bargaining table before the end of the year.

Despite an uncertain backdrop, Roth said he is overweight equities with an optimistic view of the economy, expecting “above-trendline growth” over the next couple of years as “COVID increasingly goes in the rearview mirror.” He cautioned, though, that “the biggest risk to that outlook is inflation, if not stagflation, from the labor-market and supply-chain problems.”

Roth favors cyclical stocks, such as financials energy and industrials, as well as “high-quality” companies with strong, durable earnings in the face of inflationary pressures. The energy sector of the S&P 500 rose about 3% Friday, even as the index slid, according to FactSet data.

Read: Should energy’s ‘lonely rally’ in September worry the stock-market bulls?

Which companies were in focus?

  • Camber Energy Inc. CEI appeared the hottest name on Wall Street as the oil-and-gas company’s stock once again was the most actively traded on major U.S. exchanges ahead of Friday’s open. Shares of Camber closed almost 4% lower.
  • Shares of ChemoCentryx Inc. CCXI soared 96% Friday after the company said that it had received approval from the Food and Drug Administration for its Anca-associated vasculitis therapy.
  • Sam’s Club, the Walmart Inc. WMT warehouse shopping club, announced its holiday plans on Friday, which include the launch of a direct-to-home wine delivery service. Walmart shares closed 0.3% higher.
  • U.S.-listed shares of AstraZeneca AZN gained 0.4% on Friday after the company said an experimental asthma drug it is developing with Amgen AMGN has been given an orphan drug designation as a treatment for eosinophilic esophagitis, a rare inflammatory disease. Amgen shares slipped about 0.1%.

How did other assets trade?

  • The U.S. oil benchmark  rose 1.3% Friday to settle at $79.35 a barrel, booking a nearly 5% gain for the week. Gold futures   ended lower, falling 0.1% to settle at $1,757.40 an ounce.
  • The ICE U.S. Dollar Index   a measure of the currency against a basket of six major rivals, fell 0.1% Friday but still gained 0.1% for the week.
  • In European equities, the Stoxx Europe 600  closed 0.3% lower on Friday, but notched a 1% gain for the week. London’s FTSE 100 UKX  rose 0.3% Friday, also logging a 1% weekly advance.
  • China’s CSI 300 index rose 1.3% as markets returned from a multiday holiday. China’s Shanghai Composite closed 0.7% higher. Meanwhile, Japan’s Nikkei 225  gained 1.3% on Friday, helping to mitigate a 2.5% weekly decline.

—Barbara Kollmeyer contributed to this report.

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