Stocks Gain, Bond Yields Spike as Hiring Pause Could Be Temporary

Stocks tilt higher and Treasury yields rise (moving the opposite of falling bond prices) after the latest labor market check-in shows the U.S. economy created 271,000 new jobs in October. That figure marks the biggest gain of the year, pushing the unemployment rate down to a seven year-low of 5%.

Now, there were a couple of sobering details within the report, including a September revision that revealed a weaker hiring month than initially thought. But combined, August and September figures were pushed higher in the revision.

As for financial markets, they’re ramping up the jabber for a 2015 rate hike. The CME Group’s FedWatch Tool, calculated based on pricing in the Fed funds futures market, shows traders are pricing in about a 70% shot for a rate hike in December according to market pricing on Friday. That’s up from the 35% odds priced in right after the Fed took a pass on an October rate change but issued a statement entertaining the thought of a December hike. Traders in this market see a 74% chance for a hike in January and a 85% shot for a hike in March.

If weekly stock gains hold, which they look inclined to do, it will mark the sixth straight weekly gain for the broad-based S&P 500 (SPX) as the rally from the China-induced summer stomping continues.

Only a Temporary Pause? Street economists note the October jobs report suggests a slowdown in job creation toward the end of summer was temporary. Economists polled by MarketWatch had expected a gain of 180,000 nonfarm jobs, not the 271K actually recorded. Employment gains for August and September were revised up by a combined 12,000, the Labor Department also said Friday. The government said 137,000 new jobs were created in September instead of 142,000. August's gain was raised to 153,000 from 136,000. Here’s a number to discuss: the underemployment rate—which includes part-time workers who’d prefer a full-time position and people who want to work but have given up looking—fell to 9.8%, the lowest since May 2008.

Finally, Some Money to Spend? The long-awaited increase in worker pay might finally be here. The average hourly wage paid to American workers rose 0.4% in October and posted the strongest 12-month gain since mid-2009. The typical worker earned $25.20 an hour in October, up 9 cents from the prior month. From October 2014 to October 2015, hourly wages rose 2.5%, the best year-over-year gain since the U.S. exited recession in June 2009. Annualized increases in pay had stuck to a tight range of 2.2% or less for the past five years, but economists have been expecting a faster increase amid a deep drop in unemployment and the creation of millions of new jobs. The amount of time people worked each week, meanwhile, was flat at 34.5 hours last month.

Disney Gets Revenue Boost. Walt Disney Co. DIS and other discretionary spending and media stocks could be the long-run beneficiaries of stronger consumer spending. After hours Thursday, DIS said its profit rose 7.3% in the latest quarter, helped by stronger revenue in its media networks and resorts businesses. Still, shares fell 2% in after-hours trading as revenue didn't rise as much as analysts had expected. Media industry stocks, including DIS, have been under pressure in recent months concerns about the pace of cable cord-cutting. During August, Disney cut its outlook for the cable segment's "operating growth" and revealed "modest" subscriber losses at ESPN.