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(Reuters) – Wall Street’s main indexes were set to open higher on Friday after data showed U.S. jobs grew more than expected in October but a tick higher in unemployment rate supported hopes that the Federal Reserve could deliver smaller rate hikes in the future.
The U.S. Labor Department’s closely watched non-farm payrolls report showed a rise in the unemployment rate to 3.7% last month from 3.5% in September, suggesting some loosening in labor market conditions that could give the Fed cover to shift towards smaller rate increases next month.
It also showed average hourly earnings rose 0.4% in October against a forecast of 0.3%, while nonfarm payrolls increased by 261,000 jobs against expectations of 200,000 after rising 263,000 in September.
The report was a key focus area for markets after hawkish comments from Fed Chair Jerome Powell on Wednesday spurred fears that the central bank could keep raising borrowing costs for longer than previously expected.
“Powell should also be pleased that the unemployment rate went up from 3.6% to 3.7%. All members of the Fed want and are expecting unemployment to rise at least a full percentage point,” said Bryce Doty, senior portfolio Manager at Sit Fixed Income Advisors.
The reading comes on the heels of a conflicting set of data which, while pointing to a slowdown in certain pockets of the economy, has also highlighted resilience in labor demand in the United States despite the Fed’s aggressive policy moves to control inflation.
“This one’s a step in the right direction because it’s the third month in a row of more modest hourly earnings gains,” said Jason Pride, chief investment officer for private wealth at Glenmede in Philadelphia.
Traders’ bets of a 75 basis point rate hike in December briefly rose to 64.5% after the release of the data but swiftly slipped back to around 60%.
Market focus will now turn to a key inflation reading due next week as well as U.S. midterm elections on Nov. 8, where control of Congress is at stake.
The benchmark S&P 500 and the tech-heavy Nasdaq were set for their first weekly decline in three weeks on worries that the Fed would stick to its hawkish stance until it sees strong evidence of price pressures easing and the labor market cooling.
At 8:55 a.m. ET, Dow e-minis were up 200 points, or 0.62%, S&P 500 e-minis were up 32.25 points, or 0.87%, and Nasdaq 100 e-minis were up 110 points, or 1.03%.
U.S.-listed shares of Chinese companies including Alibaba (NYSE:BABA), JD (NASDAQ:JD).com and Baidu (NASDAQ:BIDU) climbed between 8% and 9% in premarket trading after rumors and news reports fanned hopes for twin relief in U.S.-China tension and China’s tough COVID rules.
Starbucks Corp (NASDAQ:SBUX) rose 6.0% after it topped Wall Street estimates for quarterly comparable sales and profit, while DoorDash Inc’s revenue beat lifted the food delivery firm’s shares 8.6%.
PayPal Holdings Inc (NASDAQ:PYPL) fell 5.6% after the online payments firm cut its annual revenue growth forecast in anticipation of a broader economic downturn.
