Stocks gain as tepid jobs report stokes hopes for low rates

Hawkish statements from Fed Chair Janet Yellen and Vice Chair Stanley Fischer last week had increased expectations that the USA central bank is closer to raising rates, though most investors see one increase in December as most likely if the Fed hikes this year.

The dollar index, which measures the greenback against a basket of six major currencies, bounced back after touching a one-week low to trade up 0.22 percent.

The national unemployment rate was unchanged at 4.9 percent. US crude had fallen 9 percent over the last four days.

Hiring downshifted last month as US employers added a modest 151,000 jobs, about half the blockbuster gains of the two previous months. Over the last three months, job gains have averaged 232,000 a month, with 271,000 in June and 275,000 in July.

“The August employment report showed solid employment gains, a stable unemployment rate, but weaker details, notably a decline in the average workweek and softer average hourly earnings”, Unicredit’s Harm Bandholz said in a note to investors.

June and July employment reports were extremely positive, and wage growth seemed to be picking up.

Also worth noting, the USA economy has generated 15.1 million net new jobs – private sector jobs! – since the labor market nadir in February 2010. The reason? It’s widely assumed that the Federal Reserve will rely on it heavily to decide whether or not to raise interest rates later this month. Yellen has said the economy needs to create just under 100,000 jobs a month to keep up with population growth.

USA stocks bounced higher Friday as the closely watched jobs report came in weaker than Wall Street’s consensus estimate, suggesting that the Federal Reserve may hold off on hiking interest rates when policy makers meet later this month. The unemployment rate and labour participation rate held steady, while wage gains moderated and hours worked were the lowest since 2014. Utilities are known for paying large dividends, similar to bonds, and lower interest rates mean lower bond yields. Oil futures were attempting to erase the 3% drop seen on Thursday, finding support after Russian President Vladimir Putin, during a Bloomberg interview, called on oil-producing countries to cap production levels (http://www.marketwatch.com/story/putin-calls-on-oil-producers-to-cap-output-2016-09-02) at a meeting later this month. But for the seven-plus years since the current economic recovery began in the middle of 2009, manufacturing wages have advanced by only 13.08 percent – well behind the overall private sector’s sluggish enough 16.21 percent improvement. On the Nasdaq, 1,888 issues rose and 732 fell. Cigarette makers also did well, as Reynolds American and Altria Group gained ground.

Lululemon Athletica shares were down 8.1 percent at $70.45 in premarket trading after the Canadian yoga wear retailer reported quarterly comparable-sales growth that fell short of expectations. Its forecast for the rest of the year also failed to inspire investors. Silver added 42 cents, or 2.2 percent, to $19.37 an ounce. The stock tumbled $7.33, or 9.6 percent, to $69.33.

“We would expect a looser fiscal [policy] to be pursued from next year, nearly independent of the election outcome”, said Joe Quinlan, a head of strategy at U.S. Trust. Hong Kong’s Hang Seng rose 0.5 percent. The dollar rose to 104.17 yen from 103.32 yen and the euro edged down to $1.1162 from $1.1197.

In the eurozone, Frankfurt’s DAX 30 index firmed 0.8 per cent and the Paris CAC 40 was 1.6 per cent higher compared with the close yesterday.