The Labor Department’s closely watched employment report showed nonfarm payrolls increased by 315,000 jobs last month compared with expectations of 300,000. Average hourly earnings rose 0.3% compared with estimates of 0.4%.
Meanwhile, the unemployment rate edged up to 3.7% from a pre-pandemic low of 3.5%.
“The report was a step in the right direction, but it wasn’t a giant leap in that direction,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments in Milwaukee, Wisconsin.
“So on the margin it shifts the balance towards a 50 basis point hike instead of 75 basis point, but the key thing will be of course the inflation data. That will probably seal the deal as to whether it should be 50 or 75 basis point ”
Traders pared their bets on a third straight 75 basis points rate hike in September to 62% from 70% before the jobs report was released, according to CME Fedwatch tool.
Wage growth data is seen as important to the Fed’s deliberations on increasing interest rates as the central bank looks to cool down labor demand and the overall economy to bring inflation back to its 2% target.
The focus now turns to the August consumer price report due mid-month.
Fears of aggressive policy tightening have gripped Wall Street since Fed Chair Jerome Powell’s hawkish remarks last Friday about keeping monetary policy tight “for some time”, with the S&P 500 sliding 5.1% since.
All the three main indexes are set for a third straight weekly loss.
At 9:50 am ET, the Dow Jones Industrial Average was up 142.99 points, or 0.45%, at 31,799.41, the S&P 500 was up 21.36 points, or 0.54%, at 3,988.21, and the Nasdaq Composite was up 44.49 points, or 0.38%, at 11,829.61.
All the S&P 500 sectors rose in early trading, with energy stocks up 1.6% as oil prices gained more than $2 a barrel ahead of OPEC+ meeting to discuss production cuts.
Banks gained 1.1%, led by a 1.4% rise in shares of Bank of America.
Rate-sensitive technology and growth stocks were mixed. Shares of Amazon.com, Microsoft Corp and Apple Inc, which suffered the brunt of the recent selloff, rose between 0.3% and 0.8%.
The CBOE volatility index, also known as Wall Street’s fear gauge, fell to a one-week low of 24.16 points.
Advancing issues outnumbered decliners by a 2.76-to-1 ratio on the NYSE and by a 1.31-to-1 ratio on the Nasdaq.
The S&P index recorded one new 52-week high and one new low, while the Nasdaq recorded 32 new highs and 46 new lows.