The S&P 500 Index hasn’t seen a 1 percent move in either direction for 40 days, the longest such streak in more than two years. Things are not that much different in the currency and bond markets. Treasury 10-year yields have traded in a range of 1.45 percent to 1.63 percent since mid-July, while a gauge of the dollar against its major peers is virtually unchanged from the average for that period, according to Bloomberg.
Bulls cheered the fact that U.S. payrolls grew at a slower but solid pace in August, which is consistent with a steady pace of improvement in the world’s largest economy. Meanwhile, bears said the moderation in wages just wasn’t encouraging enough. Without any definitive conclusion, the data kept one thing very much alive -- the Federal Reserve debate. Analysts were split on whether the numbers give officials green light to boost rates in September for the first time in 2016, while futures traders slightly pared bets on a move.
“The market is talking out of both sides of its mouth,” said Mariann Montagne, who helps oversee $870 million as senior investment analyst at Gradient Investments Group. “What we’re seeing is the increase in jobs is below expectations, and when you couple that with the manufacturing report yesterday, that would indicate the Fed is less likely to raise rates. If I take it at face value, it looks like rates will rise this year, but it won’t be in September.”
Traders are pricing in a 32 percent chance the central bank will raise borrowing costs at its September meeting, down from 34 percent before the jobs data, though the probability earlier slipped as low as 20 percent. The first month with better-than-even odds of a hike is December.
Those wagers have influenced trading with stocks, bonds and the dollar amid a spate of mixed economic data and comments from central bank officials. Financial markets were taken aback on Thursday by weak manufacturing numbers, after other reports pointed to a recovery on the heels of still-robust consumer spending. While Fed Chair Janet Yellen said last week that the case for an increase in borrowing costs has strengthened, wagers on a hike receded even before the jobs figures.
Richmond Fed President Jeffrey Lacker said Friday the message he took from the August data was that “labor markets are continuing to tighten.” He called the report “reasonably strong.”
Stocks
The S&P 500 rose 0.4 percent at 4 p.m. in New York, rebounding after three days of declines. Utilities, energy, raw-materials and consumer-staples shares were the strongest among the main industries, rising at least 0.6 percent. Health-care and consumer-discretionary companies, lagged.
Since the gauge reached a record in mid-August, it’s been stuck in neutral amid Fed rate-hike speculation and lackluster economic data.
Those hoping the jobs report would mark an end to the “dullest period for the U.S. equity market in modern times are likely to be disappointed,” Michael Shaoul, the chief executive officer of Marketfield Asset Management in New York, wrote in a note to clients. “Overall, the report will do nothing to settle the ongoing debate within the FOMC regarding the need for or timing of interest-rate increases.”
The Stoxx Europe 600 Index rallied 2 percent, the most since June 29, with the advance gathering pace after the U.S. jobs report. Consumer-related companies and utilities led the gains on Friday, with Germany’s RWE AG and Dutch Unilever up more than 4 percent. Drugmakers rebounded after falling to their lowest prices since June. Miners climbed with commodities, while energy producers rallied the most in two months.
The MSCI Emerging Markets Index climbed 1 percent as a rally in commodities spurred gains in stocks of raw-material exporters from Russia to Brazil and South Africa.
Bonds
Treasury two-year note yields, the coupon securities most sensitive to Fed policy, was little changed at 0.79 percent, according to Bloomberg Bond Trader data. Benchmark 10-year note yields advanced three basis points, or 0.03 percentage point, to 1.60 percent.
Bill Gross says August’s jobs data ensure the Fed will raise interest rates this month. Pacific Investment Management Co., his former firm, says the central bank will wait.
"September is on -- I don’t think it’s 100 percent on, but I think it’s close to 100 percent," Gross, manager of the Janus Global Unconstrained Bond Fund, said in an interview with Bloomberg radio. "If these types of jobs don’t do it, I’m not quite sure what does."
Pimco, the firm Gross co-founded and left in 2014, is taking the opposite stance.
“It’s kind of a weak report across the board, so it doesn’t change the view we’ve had that September is very unlikely,” Scott Mather, chief investment officer of U.S. core strategies and a managing director at Pimco, said in a Bloomberg Radio interview. “But then of course that makes December much more likely after that.”
Futures traders see about a 60 percent chance of a move by December.
Currencies
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, rose 0.1 percent. The greenback added 0.4 percent to $1.1156 per euro, and advanced 0.7 percent to 103.97 yen.
The pound is enjoying its longest run of gains since before Britain voted to leave the European Union as data signal the economic consequences of the decision may be less dire than some analysts feared. Sterling climbed to its highest level in a month versus the dollar, extending its advance into a third week, after a U.K. construction index surged the most since 2013 as activity picked up across the board.
The Canadian dollar gained the most in five weeks after the nation’s July trade deficit narrowed more than economists predicted, adding to evidence the Bank of Canada is less likely to lower interest rates.
Commodities
Oil snapped four days of declines as Vladimir Putin said he’d like Russia and OPEC to reach an oil output freeze apart from Iran. West Texas Intermediate for October delivery climbed 3 percent to settle at $44.44 a barrel on the New York Mercantile Exchange.
The Russian president said in an interview that he may recommend completing the plan when he meets with Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman at the Group of 20 summit in China next week. A freeze should exclude Iran until that country raises production to pre-sanctions levels, he said. OPEC’s crude output rose to a record in August, climbing by 120,000 barrels a day.
Crude rallied 7.5 percent in August amid speculation that talks in Algiers at the end of September may lead to an agreement to manage the market. A cap on production would be positive, Saudi Arabia’s Energy Minister Khalid Al-Falih said in an interview last week, though he ruled out an output cut. A freeze deal between members of the Organization of Petroleum Exporting Countries and other producers was proposed in February, but a meeting in April ended with no final accord.
“This is another strong sign that the odds of a production freeze are going up,” Phil Flynn, senior market analyst at Price Futures Group in Chicago, said by telephone. “My sense is that we are very close to a deal because the major players seem to be on board with it.”
Gold futures for December delivery gained 0.7 percent to settle at $1,326.70 an ounce at 1:47 p.m. on the Comex in New York, erasing a weekly loss.