Stocks Edge Higher After Jobs Report

U.S. stocks wobbled after a disappointing monthly employment report showed the economic recovery remains uneven, boosting expectations that Federal Reserve monetary policy may remain supportive for longer.

The S&P 500 was flat in early trading Friday, after futures wavered between small gains and losses. The broad index has risen for three straight sessions, closing up 0.8% Thursday. The Nasdaq Composite Index edged down less than 0.1% as technology stocks worked to extend the previous day’s rally.  The Dow Jones Industrial Average slipped about 30 points, or 0.1%.

The yield on the benchmark 10-year Treasury note climbed above 1.6% before the jobs report was out, for the first time since June. It then edged down to 1.58% in recent trading.

The U.S. added 194,000 jobs in September, data showed Friday, substantially less than expected and down from August. Economists had forecast a gain of 500,000 jobs. The end of federal Covid-related jobless benefits and reopened schools drove some workers back into the labor force, but the Delta variant and persistent staffing shortages are restraining the recovery.

“I was surprised at how bad the miss was,” said Shana Sissel, chief investment officer at Spotlight Asset Group.

The Federal Reserve has said the labor market’s recovery is the key variable driving monetary policy and investors are watching closely to see if Friday’s report could affect plans to taper stimulus. 

Volatility returned to markets in recent days, with the S&P 500 swinging at least 1% for three out of four days this week. Investors have been focused on surging energy prices, concerns about inflation and negotiations on the debt ceiling. Lawmakers struck a deal for a short-term extension to the debt limit in the Senate on Thursday, stoking a rally in the stock market.

Some analysts were questioning whether the “buy the dip” trade would persist during the recent market turbulence. But stocks have rebounded in recent sessions and are on track to notch weekly gains, showing that some investors did step in.

“Any pullback we’ve seen attracts investors. It seems to us that any 1-3% fall in equity markets just has investors coming back in,” said John O’Toole, head of multiasset fund solutions at Amundi. “The relief rally that we’ve seen, that probably stays for a bit.” His strategy is also to wait for pullbacks to add equity risk.

Oil prices rose, with global benchmark Brent adding 0.6% to trade at $82.45. The Energy Department rebuffed claims that it was planning to release strategic reserves of oil to counter the rise in energy prices. 

“This was the second news of the week where there was hope for additional supply; OPEC also stuck to its plan and didn’t release any additional production,” said Esty Dwek, chief investment officer of FlowBank. “There is underlying support for prices. The Covid story is fading and demand for energy, especially when we get into the winter, is going to stay up. It’s a concern for markets but I don’t think it will derail the recovery.” 

Overseas, the pan-continental Stoxx Europe 600 declined 0.1%. Among European equities, energy stocks gained on the back of the rise in crude prices. Eni added 1.5% and Equinor climbed 2.3%.

Most major benchmarks in Asia rose. Mainland China’s markets reopened after the Golden Week holiday, with the Shanghai Composite Index advancing 0.5%. Hong Kong’s Hang Seng Index added 0.3% while Japan’s Nikkei 225 climbed 1.3%.

The U.S. added 194,000 jobs in September, substantially less than expected and down from August.

Photo: Joe Raedle/Getty Images

–Gunjan Banerji contributed to this article. Write to Anna Hirtenstein at anna.hirtenstein@wsj.com

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