U.S. Stocks Advance Amid Steady But Slower Gain in August Hiring

  • September Fed move considered less likely as payrolls miss
  • S&P 500 posts weekly advance after back-to-back drops

U.S. Adds 151,000 Jobs in August, Jobless Rate at 4.9%

U.S. stocks climbed as August payroll data signaled steady labor-market growth, though not enough to force the Federal Reserve to raise interest rates.

A report showed fewer jobs than forecast were added last month, tempering increased speculation that policy makers could boost borrowing costs as soon as this month. That brought a measure of relief to investors, who boosted utilities, raw-materials and energy shares the most. Crude oil rebounded from a four-day slide. The odds for a rate hike this month briefly dipped as low as 20 percent before climbing back to levels held before the data.

The S&P 500 Index rose 0.4 percent to 2,179.98 at 4 p.m. in New York, halting a three-day decline. Stocks wavered at midday, trimming most of an early rally before recovering in the late afternoon. The Dow Jones Industrial Average gained 72.66 points, or 0.4 percent, to 18,491.96. The Nasdaq Composite Index also increased 0.4 percent. About 5.8 billion shares traded hands on U.S. exchanges, 13 percent below the three-month average. U.S. equity markets are closed on Monday for Labor Day.

“This number is important in whether the Fed hikes in September, and along with the ISM report helps push a September rate hike off the table,” said Jeffrey Kleintop, Charles Schwab Corp.’s chief global investment strategist. “The move in the market is probably related to a little sense of relief that a rate hike will be pushed off. Given the ISM was weaker, some people would’ve been concerned if the Fed went in September.”

Payrolls climbed by 151,000 last month following a 275,000 gain in July that was larger than previously estimated, according to the Labor Department. The median forecast in a Bloomberg survey called for 180,000. The jobless rate and labor participation rate held steady, while wage gains moderated.

While Fed Chair Janet Yellen left the timing of a rate hike open in a speech last week, she said the central bank’s decisions depend on the degree that data “continues to confirm” the outlook. That, and other recent remarks by Fed officials, suggest that job gains need to be merely solid -- rather than extraordinary -- to warrant raising borrowing costs for the first time in 2016.

Richmond Fed President Jeffrey Lacker said Friday the message he took from the August data was that “labor markets are continuing to tighten.” He called the report “reasonably strong.”

Even as some saw the lower-than-forecast payroll gains as reason enough for the Fed to stand pat, traders weren’t so sure. Fed-funds futures reflected a 32 percent chance the central bank will boost rates at its September meeting, according to data compiled by Bloomberg. Odds of a December hike are 60 percent.

“There’s no question that the number lowers the odds of a September rate hike, but I wouldn’t say it’s been completely taken off the table,” said Matt Maley, an equity strategist in New York at Miller Tabak & Co LLC. “It doesn’t seem like currency and credit markets have taken September off the table yet.”

With today’s climb, the S&P 500 gained 0.5 percent this week, after ending in the red for the prior two. Since the gauge reached a record in mid-August, it’s been stuck in neutral amid Fed rate-hike speculation and lackluster economic data, including a reading yesterday showing manufacturing activity contracted last month. The benchmark index hasn’t seen a 1 percent move in either direction for 40 days, the longest such streak in more than two years.

August employment reports tend to miss economist estimates, and that’s typically been bad news for equities. Since 1996, 15 out of 19 releases have trailed forecasts, data compiled by Bloomberg show. When they did, the S&P 500 Index fell an average 0.4 percent, compared with a mean increase of 0.1 percent for all payrolls days.

In Friday’s trading, utilities, energy, raw-materials and consumer-staples shares were the strongest among the S&P 500’s main industries, rising at least 0.6 percent. Health-care and consumer-discretionary companies, lagged, little changed for the session.

The CBOE Volatility Index fell 11 percent, the most in two months, to 11.98. The measure of market turbulence known as the VIX declined for just the second time in 10 sessions, dropping after a late-August surge sent it to the biggest monthly jump in a year.

Energy producers snapped a three-day losing streak as West Texas Intermediate crude futures gained 3 percent to $44.44 a barrel. Russian President as Vladimir Putin said he’d like Russia and OPEC to reach an oil output freeze apart from Iran. Anadarko Petroleum Corp. and Apache Corp. rose more than 3 percent.

Among shares moving on corporate news, Lululemon Athletica Inc. fell 11 percent, the most since December. Its forecast missed some estimates, sparking concern about slowing demand and competition in athletic apparel.

Carnival Corp. lost 4.7 percent, the most in two months, after Morgan Stanley downgraded the shares to the equivalent of sell from neutral. Royal Caribbean Cruises Ltd. fell 3.7 percent to halt its longest winning streak in five weeks.

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