U.S. equity futures moved higher on Friday after a disappointing July employment report strengthened expectations that the Federal Reserve may hold interest rates steady at its next policy meeting.
Markets reacted positively to the weaker labour market figures, with investors viewing them as reducing the likelihood of further monetary tightening in the near term.
July Employment Report Misses Forecasts
The U.S. Labor Department reported that non-farm payrolls fell by 23,000 jobs in July, following a downwardly revised increase of 20,000 in June.
Economists had forecast an increase of 88,000 jobs after June was initially reported at 57,000.
Although the figures point to slowing hiring activity, they also eased concerns that persistent labour market strength would force the Federal Reserve to tighten policy further.
The unemployment rate unexpectedly declined to 4.1% from 4.2%, while economists had anticipated no change.
Bond Yields Fall Sharply
The weaker payrolls report prompted a strong rally in U.S. government bonds.
The benchmark 10-year Treasury yield dropped by more than 1.2%, reflecting growing expectations that policymakers will adopt a more cautious approach to interest rates.
Wall Street Closed Lower Ahead of the Report
Thursday’s session ended in negative territory as investors avoided taking large positions before the employment figures.
The Dow Jones Industrial Average lost 464.02 points, or 0.9%, to finish at 53,885.10.
The S&P 500 slipped 0.2% to 7,709.96, while the Nasdaq Composite eased 0.1% to 26,348.35.
Salesforce and Industrials Drag the Dow Lower
Salesforce (NYSE:CRM) fell 3.2% after CNBC reported the company would appoint former Oracle (NYSE:ORCL) executive Miguel Milano as chief operating officer.
Boeing (NYSE:BA) and Honeywell (NASDAQ:HON) also declined sharply, losing 3.3% and 3%, respectively.
Telecom Shares Rebound While Airlines Decline
Weekly jobless claims released ahead of the payrolls report showed initial claims increased slightly to 199,000, remaining below market expectations.
Telecommunications stocks recovered strongly, with the NYSE Arca North American Telecom Index advancing 3.1%.
Oil service companies also gained as crude prices rebounded, while airline stocks weakened as higher fuel costs weighed on the sector.
Housing and brokerage stocks also finished the previous session lower.
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