Nasdaq Hits Record High as Weak Jobs Data Eases Fed Rate Hike Concerns

US stock markets advanced notably on Friday, with the Nasdaq Composite reaching an intraday record high. This surge came after the Labor Department released weaker-than-expected jobs figures, which reduced the likelihood of a Federal Reserve interest rate increase in the near term.

The Labor Department reported that nonfarm payrolls increased by just 29,000 in September, a figure far below the 90,000 jobs forecast by economists surveyed by Reuters. Additionally, the employment numbers for July and August were revised downward, reflecting a softer labor market than previously estimated.

This disappointing jobs report influenced market expectations for monetary policy. According to CME FedWatch data, the probability of at least a 25 basis point rate hike by the Fed in its upcoming meeting dropped to 23.8% from 24.4% the previous day, and sharply down from 64.2% a week earlier. The data suggests investors are increasingly anticipating a pause in rate increases as the economy shows signs of moderating growth.

Robert Bernstone, head of trading at SummitTX Capital in New York, commented on the market reaction: "Today's news was okay insofar as it means the economy isn't roaring. But how good is that? Yes, it's fine insofar as it takes the short-term rate hike off, but there is a concern over the economy, there is a concern over inflation, so cautious optimism is kind of where people are." He also noted that despite these concerns, a short-term rally could occur because the current market upswing is generally unpopular among investors.

Broad market indexes posted gains on the day. The Dow Jones Industrial Average rose 217.14 points, or 0.43%, closing at 51,143.70. The S&P 500 increased by 53.99 points, or 0.70%, finishing at 7,720.44. Meanwhile, the Nasdaq Composite climbed 307.48 points, or 1.14%, to close at 27,179.15.

Stocks sensitive to interest rates experienced notable gains. The S&P 500 real estate sector rose 0.5%, benefiting from lower expectations for rate hikes. The Russell 2000 small-cap index jumped about 1%, positioning itself for its largest daily gain in a month.

Large-cap technology companies were among the strongest contributors to the market's advance. Nvidia and Tesla led gains that boosted the S&P 500. Tesla's positive performance helped the consumer discretionary sector climb more than 1%, making it the best-performing sector in the S&P 500 on Friday.

Earlier in the week, investors had already begun to scale back their expectations for an October rate increase. This shift was influenced by a series of economic reports indicating steady activity and a slower pace of inflation, along with cautious remarks from Fed officials signaling restraint on further hikes.

Despite Friday’s rally, both the Dow and S&P 500 were set to finish the week lower, marking the fourth weekly decline in the past five. In contrast, the Nasdaq was on track for a weekly gain, its fifth positive week in six.

In company-specific news, Nike shares fell 4.5% following a warning about weakening demand in China. The US-based sportswear giant also announced job reductions and plans to reorganize its global business units amid concerns over revenue growth.

Technology hardware stocks faced declines, particularly in the data storage segment. Western Digital shares dropped nearly 10%, while Seagate Technology slid about 11%. This weakness came after news that Toshiba intends to double its production capacity for hard disk drives used in artificial intelligence data centers by fiscal year 2027, signaling increased competition in the sector.

Market breadth favored advancing stocks, with advancing issues outnumbering decliners by nearly 2-to-1 on the New York Stock Exchange and approximately 1.5-to-1 on the Nasdaq. The S&P 500 added 10 new 52-week highs but also recorded 18 new lows. The Nasdaq Composite had 51 new highs and 191 new lows, reflecting mixed momentum among individual stocks.

Overall, the combination of softer jobs data and cautious Fed commentary contributed to a positive session for US equities, especially for growth-oriented and rate-sensitive sectors. Investors will be closely watching upcoming economic releases and Fed communications for further clues on the path of monetary policy and its impact on the markets.