U.S. stocks turned positive midsession Friday as investors weighed whether a weak U.S. jobs report would encourage the Federal Reserve to delay its first interest-rate increase in almost a decade.
Bond yields slid.
The disappointing rate of job creation and a decline in wages in September cast more doubt on whether the Fed would raise interest rates this year. Deepening uncertainty about the U.S. economy is likely to stoke even more volatility across financial markets as investors weigh the prospect of many more months of near-zero rates.
The yield on the benchmark U.S. Treasury note fell below 2% for the first time since Aug. 24, a time of particularly heightened market turmoil. In recent trading, the yield was 1.970%, compared with 2.05% right before the release, according to Tradeweb. Bond yields fall as their prices rise.
The Dow Jones Industrial Average rose 52 points, or 0.3%, at 16324.99 in midday trade after earlier being down as much as 258 points.
The S&P 500 advanced 6.3 points, or 0.3%, with energy stocks up the most. The Nasdaq Composite rose 0.5%.
Traders said major indexes erased losses as investors grappled with two cross currents. On one hand, the report suggested the U.S. economy is weaker than investors believed. On the other hand, with Treasury yields below 2%, many investors believe stocks are the better place to put their money until rates rise.
“There’s more of a reason to put money into assets that have growth,” said Ian Winer, director of equity trading at Wedbush Securities, adding that biotechnology stocks, a high-growth area of the stock market, are posting solid gains on Friday.
The dollar fell against major currencies after the report and U.S. oil futures rose 1.3% to $ 45.30 a barrel. The price of gold, a haven investment, shot up 2.2% to $ 1,138.00 an ounce.
The Stoxx Europe 600 gained 0.5%. Before the data release, the index had been up 1.5%. The yield on 10-year German government bonds fell to 0.489%, according to Tradeweb, its lowest level in over four months.
“There’s nothing good about this report at all,” said Keith Bliss, senior vice president at brokerage Cuttone & Co. “It underscores the weakness and tentativeness we’ve been feeling in this market for some time.”
He said that when the jobs report was released, traders on the floor of the New York Stock Exchange reacted with surprise and disappointment. “The chatter on the floor as soon as it came out was you heard a lot of groans, and yells, and oh my gosh’s,” he said.
The Labor Department said nonfarm payrolls rose by 142,000 in September, far below the trend over the past year and a half, while the unemployment rate remained at 5.1%. Economists surveyed by The Wall Street Journal had projected a 200,000 increase in payrolls and the jobless rate to hold at 5.1%.
Many investors interpreted the deceleration in jobs creation as a sign that turmoil in China may be spilling over into the U.S. economy.
Investors said the downbeat jobs report also made a U.S. interest-rate increase by the Federal Reserve this year less likely.
Fed-funds futures, used by investors and traders to place bets on central-bank policy, showed a 5% likelihood of a rate increase for the Fed’s Oct. 27-28 policy meeting, compared with 14% before the jobs report, according to data from CME Group. The odds were 27% for the Dec. 15-16 meeting, compared with 44% before the data.
“This report put a major obstacle to the Fed’s path of raising rates,’’ said Gary Pollack, who helps oversee $ 12 billion as head of fixed-income trading in New York at Deutsche Bank AG DB 1.62 % ’s private wealth-management unit. “The Fed could wait until 2016 to raise rates and bond yields have room to fall.”
Bank shares slumped, weighing on major indexes, as investors considered a rate increase may be pushed out further. Higher interest rates can allow banks to earn more income from lending. Financial companies in the S&P 500 fell 1%.
Fed officials have signaled over the past week that they were on course to raise short-term interest rates later this year for the first time since 2006 as the U.S. economy has been a bright spot.
Stock investors had been hoping for a strong number, even though that would likely bring forward the prospect of a Fed rate rise, according to Christian Stocker, an analyst at UniCredit. Rock-bottom rates have helped fuel years of rising stock markets.
The report underscores that the global slowdown is weighing on growth in the U.S., said Mike Ryan, chief investment strategist for UBS Wealth Management Americas. However, he added that it was too soon to draw conclusions about what that means for U.S. corporate profits and stock-market moves over the longer run. He noted that “we’re still creating jobs” and the economy remains in a period of moderate growth.
The Fed’s decision last month not to raise rates stoked concerns about the U.S. economy’s ability to withstand turmoil in global equity markets and a slowdown in China.
Fed Chairwoman Janet Yellen last week reassured investors that the U.S. economy was strong enough to support an interest-rate increase in 2015.
Since tumbling in late August, global stock markets have seen some sharp daily swings, but have made little overall headway amid continuing uncertainty on the state of the Chinese economy and the Fed’s plans.
Japan’s Nikkei 225 was flat and Hong Kong’s Hang Seng HSNGY -0.66 % climbed 3.2% as it reopened from a holiday. Shares in Australia fell 1.2%.
—Saumya Vaishampayan and Tommy Stubbington contributed to this article.
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