Wall Street Rallies: Jobs Report Fuels Market Recovery

The September jobs report, released on October 4, 2024, sparked a Wall Street rally that erased the week's earlier losses. The report, which showed robust employment growth and a declining unemployment rate, bolstered investor confidence and fueled gains across various sectors.

The U.S. economy added 254,000 nonfarm payroll jobs in September, surpassing expectations and marking the most significant job growth since March 2024. The unemployment rate dropped to 4.1%, while average hourly earnings also exceeded expectations. This strong labor market data overshadowed investor concerns about escalating geopolitical tensions in the Middle East.


Small-cap stocks outperformed their large-cap peers, as worries about an economic slowdown subsided. The Russell 2000 index, which tracks small-cap stocks, rose 1.1% on the day. This outperformance can be attributed to the strong jobs data, which signaled a robust economy and reduced the likelihood of a recession. Additionally, small-cap stocks tend to be more sensitive to economic cycles, making them more responsive to positive economic news.


The stronger-than-expected jobs report also had an impact on U.S. Treasury yields and the U.S. dollar. The 2-year yield climbed by 20 basis points, while the 10-year yield increased by 12 basis points. This rise in yields reflected investor confidence in the economy and reduced demand for safe-haven assets. The U.S. dollar strengthened, as the solid labor market data boosted the greenback's appeal.

The probability of a 50-basis-point rate cut by the Federal Reserve in November diminished, as the stronger jobs data reduced the need for a more aggressive policy move. Traders adjusted their expectations, with the likelihood of a 50-basis-point cut falling from 30% to just 10%.

Chinese equities continued their upward trajectory, driven by ongoing domestic stimulus measures. The iShares China Large-Cap ETF FXI reached levels last seen in February 2022, just before Russia's invasion of Ukraine. The strong jobs report and improved investor sentiment contributed to this rally, as investors sought exposure to emerging markets.

In conclusion, the September jobs report fueled a Wall Street rally that erased the week's earlier losses. The strong labor market data bolstered investor confidence, leading to gains in small-cap stocks, higher U.S. Treasury yields, a stronger U.S. dollar, and a reduced probability of a 50-basis-point rate cut by the Federal Reserve. The rally in Chinese equities also benefited from the improved investor sentiment. As the market continues to digest the implications of the jobs report, investors will closely monitor economic data and geopolitical developments to gauge the trajectory of the broader economy.