• The Dow Jones recovered ground on NFP Friday, but still remains down on the week..
• The US added far more jobs than expected in September.
• Market hopes for a follow-up jumbo cut from the Fed have collapsed.

The Dow Jones Industrial Average (DJIA) rallied after US Nonfarm Payrolls (NFP) jobs figures blew past expectations. US NFP net job gains soared to 254K on Friday, cudgeling market hopes for a second double-wide rate cut from the Federal Reserve (Fed) on November 7.

The US Unemployment Rate dropped back to 4.1% from the previous 4.2%, further reinforcing a healthier-than-expected landscape in the US labor market. In addition, several months’ worth of NFP releases saw healthy upside revisions. August’s previous NFP total was lifted by an additional 17K, while July’s figure rose sharply by 55K, bringing the total up to 144K. 

Annual wage growth also firmed up in September, rising 4.0% YoY from the previous 3.9%. Investors had expected September’s Average Hourly Earnings growth to ease back to 3.8%. With wages and net jobs additions blowing well past expectations across the board, rate market expectations of a higher pace of rate cuts have taken a huge hit to round out a middling-at-best trading week.

According to the CME’s FedWatch Tool, rate trader expectations for the Fed’s November rate call plummeted post-NFP; rate futures speculators now see a 95% chance that the Fed will trim rates by a modest 25 bps on November 7, with the last 5% betting on no movement at all on the Fed funds rate.