LIVE MARKETS-S&P 500 futures add to gains, yields drop after jobs data 

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S&P 500 FUTURES ADD TO GAINS, YIELDS DROP AFTER JOBS DATA

US stock futures moved higher following the latest employment data, while Treasury yields eased as investors dialed back expectations for additional Fed tightening.

E-mini S&P 500 futures are up about 1%, building on gains of roughly 0.5% seen ahead of the report.

The September payrolls number came in well below expectations, with employers adding just 29,000 jobs vs. a Reuters estimate of 90,000. August payroll growth was also revised lower to 133,000 from 162,000.

Elsewhere in the report, the unemployment rate edged up to 4.2% from 4.1%, vs. expectations it would remain at 4.1%. Wage growth was also softer than forecast on both a monthly and annual basis.

The data reinforced the view that labor market momentum is cooling. According to CME's FedWatch Tool, traders are now assigning an 83% probability that the Fed leaves rates unchanged at its October 27-28 meeting, up from 72% before the report. The odds of a rate hike have fallen to 17% from 28%.

Rate expectations eased as well, with Fed funds futures now pricing in about 22.2 basis points of additional tightening through the end of 2026, down from 25.5 basis points before the release.

Treasuries caught a bid as well. The benchmark 10-year yield is down to around 5.17% from about 5.22% immediately before the data. It finished Thursday at 5.234%.

Nearly all major S&P 500 .SPX sectors are trading higher in the premarket. Technology is leading the advance, with the Technology Select Sector SPDR ETF XLK.P up more than 1.5%. Energy XLE.P is the lone laggard, down roughly 1.5%.

Among industry groups, regional banks are showing strength, with the SPDR S&P Regional Banking ETF KRE.P gaining about 1%. Chip stocks are also outperforming, with the Invesco PHLX Semiconductor ETF SOXQ.O jumping more than 2.5%.

Regarding the jobs data, Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin, said:

"This wasn’t a firecracker of a report; it was more like a dud."

"The labor market wasn’t as strong as we originally thought it was. July was revised back to a negative number, there was a decent bounce in August, but the bounce then fell flat with a mere +29,000 gain in September.

Jacobsen added, "The diffusion indexes dropped back below 50. Chair Warsh was concerned about the breadth of inflation, but now he’ll have to consider the lack of breadth in the labor market. This statement supports an October pause."

Here is a premarket snapshot from around 9 a.m. EDT.

(Terence Gabriel, Chuck Mikolajczak)

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