Nasdaq leads Wall Street higher as weak jobs data boosts Fed rate-cut hopes

10:00am: Jobs surprise lifts markets

Wall Street opened higher on Friday after a surprisingly weak July jobs report reinforced expectations that the Federal Reserve may be nearing the end of its tightening cycle. The Nasdaq climbed 0.7%, while the S&P 500 gained 0.3% and the Dow Jones Industrial Average added 0.2%.

The July employment report showed the US economy lost 23,000 jobs, far below expectations for an increase of 80,000, signaling that the labor market may be losing momentum. Investors viewed the data as reducing the likelihood of additional interest rate hikes this year, lifting equities at the open.

Charlie Ripley, Senior Investment Strategist at Allianz Investment Management, said the sharp payroll miss shifts the market's focus back to the employment side of the Federal Reserve's mandate. "This report squarely puts the spotlight back on the employment side of the Fed's mandate," Ripley said. "The Fed is unlikely to ignore this signal, and, if anything, it raises the bar for any Fed rate increases heading into the fall."

Among individual stocks, Trade Desk plunged after the digital advertising company reported weaker-than-expected earnings and revenue and issued disappointing guidance. Meta Platforms was also in focus after being ordered to pay nearly $1 billion over claims related to harm caused to children through social media.

Looking ahead, markets will also keep an eye on June consumer credit data for additional clues on the strength of consumer spending.

9:00am: Payrolls unexpectedly contract in July

The US labor market unexpectedly weakened in July as nonfarm payrolls fell by 23,000, marking the first monthly decline in employment in years and missing expectations for an 80,000-job gain. Private payrolls increased by just 30,000, well below forecasts of 82,000, while May and June payrolls were revised down by a combined 103,000 jobs.

The unemployment rate edged down to 4.1% from an expected 4.2%, although average hourly earnings rose just 0.1% month-over-month and 3.2% year-over-year, both below forecasts. The labor force participation rate slipped to 61.4% from an expected 61.6%, while the average workweek held steady at 34.3 hours.

The weaker-than-expected employment report prompted investors to sharply scale back expectations for a Federal Reserve interest rate hike in September, with market-implied odds falling significantly following the release.

Payrolls day

Good morning, and welcome to payrolls day, the Friday each month when Wall Street stops talking over itself to stare at one spreadsheet.

US stock futures nudged higher ahead of the July jobs report, due at 8.30 am eastern time.

Dow futures were essentially flat, the S&P 500 added 0.2% and the Nasdaq-100 rose 0.5%, which counts as enthusiasm after Thursday's muddle.

Economists surveyed by Bloomberg expect 80,000 positions were added last month, with unemployment parked at 4.2%.

Not thrilling, but the labour market has been quietly stable while everyone shouted about inflation and artificial intelligence spending.

The Federal Reserve will be reading closely as it weighs its next move on interest rates.

Oil, meanwhile, kept climbing because the US and Iran still have not shaken hands.

An Iranian semi-official news agency reported explosions in the Strait of Hormuz on Thursday night, blamed on the interception of "hostile targets".

Iran and Oman are still working towards reopening the waterway, though the latest word is US and Israeli ships need not apply.

What all that does to inflation expectations is Friday's other question, with the New York Fed's one-year survey also landing.

Earnings are thin: Vistra, Oklo, Under Armour and Wendy's.