U.S. Stocks Retreat as Jobs Data Keep Fed on Track to Tighten

  • Payrolls short of estimates still signal steady growth
  • Fed rate odds hold near 63 percent for December hike

U.S. Adds 156,000 Jobs in Sept., Jobless Rate at 5.0%

U.S. stocks slipped Friday, adding to the first weekly decline in four, as jobs data showing steady growth in the labor market kept the Federal Reserve on track to carry out an interest rate increase this year.

Materials producers led declines Friday, as gold and silver capped the worst week since at least November. Industrial shares tumbled after Honeywell International Inc. plunged the most since 2011 after profit missed targets. Tyson Foods Inc. retreated after an analyst downgraded the stock while citing a “powerfully convincing” class-action lawsuit.

The S&P 500 Index slipped 0.3 percent to 2,153.73 at 4 p.m. in New York, pushing the decline this week to 0.7 percent. The Dow Jones Industrial Average lost 31.26 points, or 0.2 percent, to 18,239.74. It dropped 0.4 percent in the week. Equities pared losses in afternoon trading as investors speculate growth isn’t robust enough to warrant an increase in the pace of tightening.

“There are still signs of overall health in a very tight labor market,” said Tony Bedikian, head of global markets for Citizens Bank in Boston. “This still leaves a likely December hike on the table here. I don’t think this report sways the Fed in terms of holding back from tightening.”

Employers added 156,000 jobs in September, showing the labor market is settling into a pace that will support the economy as the Federal Reserve considers tightening monetary policy as soon as next month. The median forecast in a Bloomberg survey of economists called for a 172,000 advance. The jobless rate rose to 5 percent as the labor participation rate ticked up.

The odds for a Fed rate hike in December have increased to 64 percent from 53 percent last week, while traders are pricing in a 17 percent chance of an increase as early as November. Officials have indicated a desire to tighten policy to a more normal level, while signaling that the pace of rate increases would be gradual so as not to knock economic growth off kilter.

The S&P 500 trades at 16.8 times its members’ earnings, compared with global stocks’ valuation of 15.5 times and 14.8 for the Stoxx Europe 600 Index.

The upcoming earnings season, which Alcoa Inc. unofficially kicks off on Oct. 11, will be closely watched for further indications of the health of corporate America. Analysts forecast a 1.5 percent contraction in three-month profit for S&P 500 members, which would be a sixth straight quarterly drop.

Before it's here, it's on the Bloomberg Terminal.