The jobs report missed expectations, but that may be just what investors needed to see. The mixed report was encouraging enough to buoy equity prices in the stock market today.
So why is a non-farm payrolls report miss good news for stocks?
Perfect Jobs Report
The non-farm payrolls report for the month of September rang in at 136,000. That missed economists’ expectations for 140,000, although it was pretty darn close by most standards.
In any regard, the unemployment rate dropped from 3.7% to 3.5% — a 50-year low — while also beating expectations for 3.7%. The August labor report was revised higher as well. Average work hours were in-line with expectations, while average hourly earnings growth missed expectations, both on a year-over-year and on a month-over-month basis.
It wasn’t a blowout and it wasn’t a disaster, and here’s why that may be perfect.
The market is looking for the Federal Reserve to become more dovish. Had the labor report come in too strong, it may have given the Fed reason to become a bit more hawkish. The market is already starting to price in a rate cut later this month, with Fed Funds futures now pricing in a 78.6% probability the Fed will cut rates. In other words, a too strong report may have caused worries about the Fed.
On the flip side, we’ve already gotten a few negative economic data points this week. When headlines say, “Worst reading for (choose your data point) since 2009,” it does little to ease investors’ concerns. In fact, it has them thinking of 2009 and a repeat of another recession. So had the labor report come in incredibly weak, it would have caused serious concern.
At the end of the day, this report was about as good as we could have asked for.
Movers in the Stock Market Today
Apple (NASDAQ:AAPL) shares rose 2.8% on the day, putting a possible breakout to new highs back on the table. The stock rallied on reports that Apple will need to increase iPhone production by 10% amid higher-than-expected demand. It also sent shares of suppliers — like Broadcom (NASDAQ:AVGO) and Skyworks Solutions (NASDAQ:SWKS) — higher on the day.
Incidentally, AVGO and SWKS were included in the Top Stock Trades column on Friday.
Disney (NYSE:DIS) will ban Netflix (NASDAQ:NFLX) ads across its networks, with the exception of ESPN. Netflix shares initially fell on the day, but rallied 1.7%, likely as the company spent $1.8 billion in advertising last year and may now spend less. This move comes as little surprise with Disney’s latest push into various streaming platforms. Disney’s streaming service, Disney+ is launching Nov. 12.
Cedar Fair (NYSE:FUN) officially turned down Six Flags’ (NYSE:SIX) cash-and-stock offer of $4 billion. Cedar Fair’s stock slipped on the news, falling 4.7% while SIX jumped 1.1%, although closed well off its highs from earlier in the session.
HP (NASDAQ:HPQ) tumbled to new 52-week lows on Friday and closed down 9.6% after the company announced a multi-year restructuring effort. It plans to cut 7,000 to 9,000 jobs over the next three years, with plans to save roughly $1 billion per year. While management’s adjusted earnings guidance for fiscal 2020 is above Street estimates, its GAAP-based outlook is well below consensus expectations.