Soft Jobs Data and Tech Gains Drive Nasdaq to Record High

Key points

• The U.S. economy added only 29,000 jobs in September, far below the expected 84,000, and the unemployment rate rose to 4.2%.
• The Nasdaq Composite gained 1.19% to close at 27,190.86, marking its third consecutive positive week.
• The S&P 500 advanced 0.73% to 7,722.72, while the Dow Jones Industrial Average rose 0.49% to 51,176.96.
• Nvidia shares rose over 3% to reach an intraday record high, supported by bullish analyst ratings from Morgan Stanley.
• Tesla reported third-quarter deliveries of 486,532 vehicles, exceeding expectations, while shares rose 4.65%.
• Seagate and Western Digital shares fell over 10% and 8%, respectively, after Toshiba announced a $380 million investment to expand hard drive production in the Philippines.

Background

This rally follows a period of market volatility driven by concerns over Federal Reserve policy. Earlier in September, markets had braced for potential rate hikes due to stubborn inflation, with the S&P 500 nearing record highs despite narrow market breadth. The recent soft jobs data has shifted expectations toward a pause in rate hikes, alleviating pressure on long-duration growth stocks. The current market dynamics reflect a shift from hawkish Fed expectations to a more dovish stance, supported by corporate earnings growth and technological advancements.

How outlets are covering it

CNBC emphasizes the significance of the soft jobs data in driving the rally, highlighting the Nasdaq's record high and the positive weekly performance of the tech-heavy index. It also notes the divergence in weekly performance between the Nasdaq and the Dow, with the Dow on track for a fourth negative week in five. Yahoo Finance focuses on the broad market rally and specific stock movements, including the sharp declines in hard drive manufacturers due to Toshiba's expansion plans. Both sources agree on the impact of the jobs report on Fed rate expectations but differ in their emphasis on sector-specific movements and individual stock performance.

Why it matters

The soft jobs data and reduced expectations for Federal Reserve rate hikes have boosted investor confidence, particularly in technology stocks. This shift in monetary policy expectations could influence market valuations and corporate earnings in the near term. The record high for the Nasdaq and the strong performance of Nvidia and Tesla indicate continued investor optimism in the tech sector, while the declines in hard drive manufacturers highlight competitive pressures in the hardware market. These developments may have broader implications for market sentiment and investment strategies in the coming months.

What to watch

Investors will closely watch the Federal Reserve's October 27-28 meeting for signals on future rate policy. The market's reaction to the soft jobs data and the potential for further economic weakness will be key. Additionally, the impact of Toshiba's expansion on hard drive manufacturers and the continued performance of tech stocks will be important factors to monitor. The upcoming presidential election in Brazil and ongoing geopolitical tensions may also influence market sentiment.