>>> US Close Dow -0,68% S&P -0,55% Nasdaq -1,16% Russell -0,90%

Closing Market Summary: Rising Rates Drive Falling Stock Prices

The stock market fell on Friday as bond yields continued to climb following the release of the Employment Situation report for September. The S&P 500 and the Dow lost 0.6% and 0.7%, respectively. The tech-heavy Nasdaq dropped 1.1%.

At its session low, the S&P 500 was down 1.1%, falling below its 50-day moving average for the first time since July. The market eventually gathered its footing though, closing near the middle of the day's trading range.

The Employment Situation report for September was mixed from a headline standpoint, as nonfarm payrolls showed a below-consensus increase of 134,000 (consensus 184K), but the August increase was revised upward to 270,000 (from 201K). Average hourly earnings rose 0.3%, as expected, and the unemployment rate fell to from 3.9% to 3.7%, marking its lowest level since 1969.

U.S. Treasuries extended their weekly losses following the release of the jobs report, pushing yields higher across the curve. The 2-yr yield advanced one basis point to 2.88%, and the benchmark 10-yr yield jumped three basis points to 3.23%, extending its weekly gain to 16 basis points and marking its highest close since 2011.

In corporate news, Costco (COST 218.82, -12.86) lost 5.6% despite reporting above-consensus earnings, and Tesla (TSLA 261.95, -19.88) dropped 7.1% after CEO Elon Musk seemingly mocked the SEC in a late Thursday tweet, just days after agreeing to a settlement with the agency over securities fraud allegations stemming from his failed bid to take the company private.

Reviewing all of Friday's economic data, which, in addition to the September Employment Situation report, included the August Trade Balance and the August Consumer Credit report:

  • September nonfarm payrolls increased by 134,000 while the consensus expected an increase of 184,000. The prior month's increase was revised to 270,000 from 201,000. Nonfarm private payrolls rose by 121,000 while the consensus expected an increase of 180,000. The previous month's increase was revised to 254,000 from 204,000. Average hourly earnings increased 0.3% (consensus +0.3%), while the previous month's increase was revised to 0.3% from 0.4%. The average workweek was reported at 34.5 (consensus 34.5). The unemployment rate fell to 3.7% from 3.9% in August (consensus 3.8%).
    • The key takeaway from the report is that the labor market is solid and still simmering with the prospect of pent-up wage pressures being unleashed at any point as employers encounter difficulty in finding qualified workers.
  • The August trade balance report showed a deficit of $53.2 billion (consensus -$52.6 billion). The July deficit was revised to $50.0 billion from $50.1 billion.
    • The key takeaway from the report is that it has yet to confirm the tariff actions are succeeding in cutting the trade deficit in a big way; moreover, with the third quarter real average trade deficit 8.9% higher than the second quarter average, trade will be accounted for as a negative input in Q3 GDP forecasts.
  • The Consumer Credit report for August showed an increase of $20.1 billion, and July credit growth was unrevised at $16.6 billion.
    • The key takeaway from the report is that it reflects a pickup in credit demand that should be construed as an offshoot of a strengthening economy led by a solid labor market.

Looking ahead, investors won't receive any notable economic data on Monday.