The US economy added only 29,000 jobs in September, well below the 84,000-85,000 expected by economists. The unemployment rate also rose to 4.2% from 4.1%, according to the US Labor Department.
The data came as a surprise to markets after stronger hiring in August. It also showed that the US labour market is losing momentum, giving investors more reason to expect the Fed to keep interest rates unchanged at its October meeting.
Treasury yields fell after the jobs report. The 10-year US Treasury yield dropped more than 5 basis points to 5.176%, while the 2-year yield fell to around 4.75%. The 30-year Treasury yield also declined to 5.57%.
The fall in yields supported technology and growth stocks, which are generally more sensitive to changes in interest rates. Shares of Nvidia, CrowdStrike, Palo Alto Networks and AMD moved higher, with some touching record levels. Intel and AMD shares gained more than 3%.
Markets also sharply reduced expectations of an October rate hike. Trading in federal funds futures showed an 86% probability that the Fed will keep rates unchanged at its October meeting, compared with about 76% a day earlier, according to CME FedWatch.
The jobs report is important for the Fed as it weighs a slowing labour market against inflation that remains above its target.Oil prices also moved lower from their recent highs, providing some support to stocks. The decline followed reports that European countries were considering releasing strategic fuel reserves amid pressure from the US.
Despite Friday’s gains, the Dow and S&P 500 remained on track for weekly losses after a sharp rise in global bond yields earlier in the week. The Nasdaq was the only major US index heading for a weekly gain.