US stocks bounce back to finish higher after surprising jobs data

NEW YORK — Wall Street stocks rebounded to join major European indexes in positive territory on Friday, after an initial sag as traders digested a hotter than expected US jobs report.

The latest employment figures showed that the US economy added 336,000 new jobs last month, virtually double what was expected and raising concern that interest rates would be kept higher for longer.

Labour Department data also showed that the US unemployment rate stayed unchanged at 3.8 per cent, maintaining pressure on policymakers looking to cool the economy.

But on the plus side for traders, who now put the prospect of higher rates before year-end at just over 40 per cent according to CME Group, wage growth fell back slightly.

The employment report initially pushed major US indexes into the red, as markets assessed the prospect that a strong job market could pressure the Federal Reserve to hike interest rates again to tackle stubborn inflation. 

However, markets swiftly reversed course, finishing higher. The Dow closed up 0.9 per cent, while the S&P 500 jumped 1.2 per cent and the Nasdaq rallied 1.6 per cent.

Initial shock from the strong jobs figures "caused the market to go down", due to potential implications for Fed interest rate policy, CFRA chief investment strategist Sam Stovall told AFP. 

But as the day wore on, investors took a closer look at the numbers, "sort of like peeling aside the leaves of an artichoke", he said. 

After spotting that "the inflation component, the wages component, came in much weaker than expected", they likely lifted their expectations for a "soft landing" — when the Fed tames inflation without plunging the country into a damaging recession. 

The yield on the 10-year US Treasury note, which spiked to new multi-year heights just after the report, moderated later in the session.

Better German data 

Major European indexes spent the day in the green, paring early gains after the US data emerged but then finding a second wind.

London advanced 0.6 per cent, Frankfurt closed with a 1.1 per cent gain and Paris added 0.9 per cent.

In Europe on Friday, data showed factory orders rose more than expected in its biggest economy Germany during August.

High inflation, elevated energy costs and weaker demand from key market China have all been weighing on Germany's crucial manufacturing sector in recent months.

The country entered recession at the start of 2023, and economic growth stagnated in the second quarter. 

A slew of weak indicators since then added to fears of a prolonged slowdown.

Among individual companies, Pioneer Natural Resources surged 10.5 per cent following reports that the shale producer was close to being acquired by ExxonMobil in a megadeal that could be worth $60 billion.