Wall St pushes higher after payrolls miss forecasts

Investors bet that a slightly softer than expected jobs report would keep the Fed from lifting rates in September.

US stocks pushed higher after payrolls data fell slightly short of expectations. Picture; AP Photo/Richard Drew.

US stocks rose Friday, even as drugmaker stock declines cut into the broader market’s advance.

Shares of biotechnology and pharmaceutical companies fell after Democratic presidential candidate Hillary Clinton unveiled a new drug pricing plan that would allow government officials to impose penalties for “unjustified price increases” on older treatments.

The Nasdaq Biotechnology index declined 0.2 per cent, while healthcare companies gained the least in the S&P 500, edging up 0.05 per cent.

Shares of EpiPen maker Mylan NV, a company at the heart of the drug-pricing debate, fell 4.7 per cent.

The swings served as a reminder that news unrelated to the Federal Reserve still matter to markets.

Many traders expected Friday’s jobs report, the last broad reading of the labour market before the Fed’s September meeting, to spark stockmarket swings, but that wasn’t the case. In morning trading, major stock indexes rose following a slightly softer-than-expected August jobs report. Declines in healthcare stocks caused indexes to pare gains in the afternoon.

The S&P 500 rose 0.4 per cent and the Nasdaq Composite edged up 0.4 per cent. The Dow Jones Industrial Average gained 0.4 per cent to 18491.96.

Stocks, bonds and even the dollar have been locked in a fairly narrow trading range and volumes have dropped off sharply, while both implied and realised volatility have plumbed their lowest in months, a state many traders have blamed on uncertainty about next moves by the Fed.

US government bonds were relatively steady Friday, with the yield on the benchmark 10-year Treasury note at 1.597 per cent, compared with 1.577 per cent just before the report was released.

Gold rose 0.8 per cent to $US1,322.10 an ounce.

The dollar weakened initially before reversing losses in recent trading. The WSJ Dollar Index, which tracks the value of a basket of 16 currencies, gained 0.2 per cent.

Fed officials, including Chair Janet Yellen and Vice Chairman Stanley Fischer, have signalled in recent speeches that rates may be on an upward trend in the near future as long as economic data cooperates.

That has called into question some of the most popular, yield-chasing trades of 2016. Utilities, one of the best-performing S&P 500 sectors this year, fell more than 6 per cent in August. Financial stocks have rallied in recent weeks on hopes for higher rates, which can boost bank profitability.

Friday’s jobs data wasn’t decisive enough to spark substantial buying or selling of these interest-rate-sensitive trades, traders said.

The KBW Nasdaq Bank index, which is up about 8 per cent from a month ago, rose. Utility companies also gained, up 1.2 per cent.

Some traders said they aren’t taking the fewer-than-expected jobs gains at face value, and instead they are discounting them in order to take into account the so-called August curse. Historically, the August jobs report has been a seasonally weak and volatile one and it is often revised substantially higher.

Investors largely expect the next US interest-rate rise to take place in December. The odds of an increase by December, as measured by the fed-funds-futures market, remained steady at about 55 per cent compared with before the jobs report was released.

On Friday, the Stoxx Europe 600 rose 2 per cent following a mixed session in Asia. Shares in Australia fell to a seven-week low, while markets in Japan closed little changed. Hong Kong’s Hang Seng index eked out small gains, closing at its highest level this year.

US-traded crude oil rose 3 per cent to $US44.44 a barrel, recovering from three days of losses after Russia signalled support for a limit on production.

Dow Jones