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(CercleFinance.com) – Wall Street returned to its recent all-time highs on Friday, boosted by significantly better-than-expected employment figures which confirm the good health of the American economy.
At the end of the morning, the Dow Jones index rose 0.2% to 42,083.3 points, while the broader S&P 500 rose 0.4% to 5,722.4 points and the Nasdaq Composite advanced 0. 7% to 18,045.2 points.
After favoring gold, oil and the dollar all week in the face of increasing perils in the Middle East, investors are frankly returning to stocks today.
Over the week as a whole, the Dow nevertheless lost another 0.6%, the S&P 500 0.4% and the Nasdaq 0.8%.
According to the Department of Labor, the American economy generated some 254,000 non-agricultural jobs in September, a number well above market expectations which were instead targeting a figure of around 140,000.
The unemployment rate also fell by 0.1 point to 4.1%, where economists expected it to be stable at 4.2%.
Furthermore, job creations for the previous two months were revised, from 89,000 to 144,000 for July and from 142,000 to 159,000 for August, for a total revision balance of +72,000 for these two months.
The report – the first since the Federal Reserve sharply cut interest rates last month for the first time in more than four years – dampened expectations of further rate cuts of 50 basis points.
‘We no longer need a further easing of 50 basis points’, BofA economists reacted this morning.
According to the CME’s FedWatch tool, the probability of an easing of 50 points next month literally collapsed after these figures, reaching only 1% compared to more than 50% a week ago.
Conversely, the scenario of a limited rate cut of 25 points has skyrocketed to almost 99%.
These good employment figures are all the more surprising as they come following a series of economic indicators suggesting a slowdown in the job market.
‘Of course, we should not generalize a statistic relating to a monthly situation’, temper the Commerzbank analysts.
‘But these figures should allay concerns that the US economy is on the brink of recession,’ adds the German bank.
On the government bond market, the yield on ten-year US Treasury bonds climbed by more than ten basis points to almost 3.96%, a high of more than a month, in the wake of the figures for employment.
Employment statistics allow the dollar to further increase its gains against the euro, which is now back below the 1.0970 mark against the greenback.
The factors that favor stocks also benefit the oil market, which was already supported by the persistence of high tensions in the Middle East.
The November contract on American light crude (West Texas Intermediate, WTI) gained 0.9% to $74.4 per barrel, which places it in a good position to gain more than 7% over the week.
In their wake, energy stocks are supporting the trend with an increase of 1% for their sector index.
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