By Geoffrey Smith
Investing.com -- U.S. stock markets opened slightly higher on Friday after an employment report that - while weak - wasn't weak enough to alter expectations that the Federal Reserve will start to tighten monetary policy next month.
The U.S. added only 194,000 jobs in the month through mid-September, the Labor Department said, well short of expectations of 500,000. However, the disappointment was softened a touch by an upward revision of over 130,000 to August's payrolls gain. Government employment was a drag on the overall number, falling 123,000, while leisure and hospitality jobs rose only 74,000, far less than indicated by ADP (NASDAQ:ADP)'s private-hiring survey earlier in the week. Gains were broadly distributed across the whole of the private sector, however, with manufacturing employment rising by over 20,000.
Average hourly earnings also continued to rise at a smart clip of 4.6% on the year, while the monthly gain of 0.6% was above expectations for a 0.4% increase. That doesn't suggest any near-term weakening of inflationary pressures. Even so, the U.S. labor market is struggling to put the pandemic behind it: Labor force participation among those of prime working age fell by the most in over a year, with female participation dropping particularly sharply.
By 9:40 AM ET (1340 GMT), the Dow Jones Industrial Average was effectively flat at 34,750 points, just 5 points below Thursday's close. The S&P 500 and the Nasdaq Composite were both up 0.2%.
Stocks remained under pressure from rising long-term interest rates, which hit valuations through the discount rate that is plugged into analysts' valuation models. The yield on the benchmark 10-Year U.S. Treasury bond returned to its three-month high of 1.60% on the back of the release, while the more interest rate-sensitive two-year note rose to 0.32%, its highest since early 2020.
Developments in the bond market supported financial stocks, as usual, as higher interest rates promised wider credit spreads in banks' core lending businesses. JPMorgan (NYSE:JPM) stock rose 0.6%, while Citigroup (NYSE:C) stock rose 0.7% and Bank of America (NYSE:BAC) stock rose 1.2%.
Tesla (NASDAQ:TSLA) stock was a rare underperformer, dipping 1.3% after CEO Elon Musk said the company has decided to move its headquarters to Texas from California.
Oil and gas stocks also gained broadly as U.S. crude oil prices hit their highest in seven years, while surging liquefied natural gas prices continued to support domestic gas prices at the Henry Hub. While futures were flat in early trading on Friday, they are on course for an eighth straight weekly gain, and have risen nearly 50% in that time.
Exxon Mobil (NYSE:XOM) stock rose 2.3% while Chevron (NYSE:CVX) stock rose 1.7% and Occidental (NYSE:OXY) stock rose 3.9%.