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S&P 500 Struggles for Direction on Bets Jobs Miss Unlikely to Delay Fed Taper By Investing.com

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© Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 struggled for direction Friday as investors downplayed the odds that the softer monthly jobs report will delay the Federal Reserve’s plans to begin tapering bond purchases in November.  

The Nasdaq lost 0.2% and the rose 0.1%.

The U.S. economy created 194,000 jobs in September, well short of forecasts for 500,000, and below the upwardly revised 155,000 jobs for August.

“The market will look back on this report as just a blip,” Eric Green, Chief Investment Officer of Equity at Penn Capital told Investing.com in an interview Friday. “There is a lot of noise in September that makes that report less reliable than normal […]We will most likely see some revisions, I am certain.” 

A closer look at the monthly jobs report revealed enough positives, including lower unemployment and higher wages, to allow the Federal Reserve’s decision to begin tapering its bond purchases next week.

According to forecasts, the unemployment rate would fall to 4.8% instead of 5.9%.

The average hourly wage rose 0.6% in August compared with the 0.4% gain recorded in August. This was due to increased wages by firms to draw new employees amid a shortage of workers.

“I think we’re still there,” Green said, referring to the Fed’s plan to taper bond purchases. “These numbers were not bad enough for the Fed to change course.”

U.S. Treasury yields climbed following the report, with the scaling 1.6%, as investors look ahead to the Fed’s path to tightened monetary policy.

Tech has struggled with rising yields as well inflation which make it less appealing to invest in sectors that have longer cash flows.

Cyclicals stocks which are in sync with the economy fared well as financial and energy pushed higher.

Oil prices rose more than 2% to $80 per barrel, the highest level since 2014. This was despite concerns over tight supply persisting despite efforts made by Russia and the U.S. to reduce fears about an energy shortage.

Hess, APA (NASDAQ) and EOG Ressources (NYSE] all rose more than 4%.

As investors wait for the beginning of the quarterly earnings season to see if there is any return to loan growth, rising bank stocks have supported financials.

Cincinnati Financial (NASDAQ :), Bank of New York Mellon (NYSE :), and State Street Corp (NYSE 🙂 were the top gainers within the sector.

Banks earn more interest from loans if they have higher interest rates.

Wall Street will close the week with a positive result after a volatile few days as traders fretted about the possibility of the United States defaulting on its debt.

Although volatility should continue for the next week, it is likely that the market will soon enter a favorable period for risk assets.

“There tends to be volatility the first couple weeks of October, then things start to calm down,” Green said. “The better performing sectors will be the more risky sectors, which in today’s market are the cyclicals stocks that have done well in the last year but have massively underperformed over the last six years.”



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