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Wall Street rallies on jobs data as ASX set to rise after mixed week

Softer-than-expected US employment report cools inflation fears, sending S&P 500 within 1% of record

By LineZotpaper
Published
Read Time3 min
Sources8 outlets
Wall Street closed near its all-time high after the latest US jobs report eased concerns that a strong economy could reignite inflation, with the S&P 500 rising 0.7 per cent and the ASX poised to open 0.3 per cent higher. The rally capped a volatile week on global markets, coming after earlier losses driven by stubbornly high bond yields and conflicting economic signals.

The S&P 500 finished up 0.7 per cent, pulling within 1 per cent of its August record, while the Dow Jones Industrial Average added 250 points (0.5 per cent) and the Nasdaq composite gained 1.2 per cent. Australian sharemarket futures pointed to a 26-point rise at the open, with the Australian dollar trading at US69.56¢.

The move higher followed a US government report showing employers added 29,000 net jobs last month, well below economist expectations and a sharp slowdown from August's net hiring of 133,000. The weaker-than-expected figure dampened speculation that the US economy might run hot enough to push inflation even higher.

Just days earlier, the mood had been sour. The S&P 500 slipped 0.3 per cent to close out its third losing month in four, with the Dow dropping 443 points (0.9 per cent). That sell-off came after data suggested the economy was even stronger in spring than previously thought, keeping bond yields elevated and stocks under pressure. At the time, futures indicated the ASX would open 51 points (0.6 per cent) lower, and the Australian dollar was US69.58¢.

The turnaround reflects the delicate balance markets are navigating: an economy that continues to chug along, powered by business investment in AI data centres and consumer spending, but also an inflation rate that remains above the Federal Reserve's 2 per cent target. The Fed recently raised its main interest rate for the first time in three years to rein in rising living costs.

A separate inflation report, which the Fed prefers to use, showed US consumer prices rose 3.4 per cent in August, lower than the 3.7 per cent economists had expected. That helped short-term Treasury yields fall as traders pared bets of another rate hike next month. CME Group data put the chance of a September rate rise at just 37 per cent, down from a coin-flip the previous day.

Longer-term bond yields, however, continued to climb, driven by broader global forces and persistent inflation uncertainty. The two-year Treasury yield briefly dipped toward 4.83 per cent before settling at 4.89 per cent.

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Analysis

Why This Matters

  • The conflicting signals between a resilient economy and still-elevated inflation keep central banks and markets in a tug-of-war, affecting borrowing costs, household budgets and investment returns globally.
  • For Australian investors, the ASX's direction is closely tied to Wall Street and the bond market. A sustained rally would ease pressure on superannuation and share portfolios after months of volatility.
  • The jobs and inflation data are among the last key inputs before the Federal Reserve's next rate decision, making each report a potential trigger for market swings.

Background

Central banks worldwide have been raising interest rates over the past several years to combat the worst inflation in decades. The Federal Reserve has led the charge, though the pace of hikes has slowed as price pressures show signs of easing. The bond market has been a key source of tension: longer-term yields have jumped on concerns that fiscal deficits, resilient growth and sticky inflation will keep rates higher for longer. This "higher for longer" narrative has weighed on equities, particularly growth and technology stocks. The US economy has defied recession predictions, supported by strong consumer spending and a boom in artificial intelligence infrastructure investment.

Key Perspectives

Bond investors: Longer-term yields reflect worries that inflation will prove stubborn and that fiscal spending will keep the economy overheated. They demand higher compensation for lending over decades. Equity investors: Softer jobs data and lower-than-expected inflation reduce the risk of further rate hikes, supporting stock valuations. However, they remain cautious about the lagged effects of already-high rates. Central banks: The Federal Reserve and its peers face a difficult balancing act: they must tighten enough to control inflation without tipping the economy into recession. The mixed data gives them cover to hold rates steady but not yet declare victory.

What to Watch

  • The next US consumer price index release and monthly jobs report for October, which will shape expectations for the Fed's November meeting.
  • The trajectory of long-term bond yields. If they continue rising despite softer data, it would signal structural concerns beyond inflation.
  • The Australian dollar's movement relative to the US dollar, which affects import prices and the Reserve Bank's policy calculus.

Sources

Zotpaper

Written by software from the reporting listed above, scored by an automated standards desk, and published without a person reading it first. If something here is wrong, tell the editor and it will be put right.

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