Stocks had a mixed reaction Friday to the surprisingly strong October jobs report as investors adjusted to the prospect of higher interest rates as early as next month.
While the major indexes, on the surface, had a muted reaction to the jobs numbers, a look at the individual parts of the market showed investors were actively reshuffling their portfolios.
Dividend-paying stocks, which are typically bought for their higher-than-average payouts when interest rates and bond yields are low, dropped sharply on Friday. The Dow Jones utility index, a basket of 15 dividend-paying utility stocks, sank 4 percent.
In contrast, bank stocks rose sharply as investors bet that higher interest rates would translate into higher profits, since they may be able to charge more for lending. JPMorgan Chase rose $2.02, or 3 percent, to $68.46; Bank of America rose 64 cents, or 3.7 percent, to $17.95; and Morgan Stanley rose $1.53, or 4.5 percent, to $35.41.
“You just need to look at those two groups and see that the market is positioning itself for higher interest rates,” said Ryan Larson, head of equity trading at RBC Global Asset Management.
Wall Street has been in a months-long guessing game about the Federal Reserve, trying to figure out when the policymakers at the nation’s central bank will finally raise interest rates. The market turmoil over the summer kept the Fed from raising rates at their September meeting, and policymakers decided to wait yet again at their October meeting to see more signs the U.S. economy was on sure footing.
By nearly every account, the October jobs report gave the Fed exactly what it wanted. The Labor Department said U.S. employers added 271,000 jobs, far more than the most hopeful of expectations, and the unemployment rate dipped to a fresh seven-year low of 5 percent, from 5.1 percent. The burst of hiring, the most in 10 months, filled jobs across a range of industries.
The Dow Jones industrial average rose 46.90 points, or 0.26 percent, to close at 17,910.33. The Standard & Poor’s 500 index fell less than a point to 2,099.20, and the Nasdaq composite rose 19.38 points, or 0.4 percent, to close 5,147.12.
The data also caused the dollar to rise sharply against its major currency counterparts. The euro fell to $1.0742, its lowest level in six months, and the dollar rose against the Japanese yen to 123.19.
The stronger dollar caused a selloff in commodities, too. Benchmark crude oil fell 91 cents to $44.29 a barrel, and Brent crude fell 56 cents to $47.42 a barrel.
