(Bloomberg) -- U.S. stock-index futures rallied as payroll growth accelerated by the most since October, calming concerns that slowing momentum in the job market would weigh on the economy.
S&P 500 Index contracts expiring in September added 0.8 percent to 2,109.50 at 8:45 a.m. in New York. Dow Jones Industrial Average futures rose 124 points, or 0.7 percent, to 17,942. Equities slipped Thursday for the second time in three days, erasing early gains as a selloff in oil dragged energy shares lower.
A report today showed America's job market stirred to life in June after a two-month lull, assuaging fears of broader cutbacks by companies. Payrolls climbed by 287,000 last month, exceeding the highest estimate in a Bloomberg survey, after a revised 11,000 gain in May, according to the Labor Department. The jobless rate rose to 4.9 percent as more people entered the labor force. Wages advanced less than projected.
“ What this does is it alleviates worries that economy was stalling, and that's very important,” said Quincy Krosby, a market strategist at Prudential Financial Inc., which oversees about $1.2 trillion. “This is important for the equity market because if we see the 10-year yield move higher, it should put pressure on utilities which have done very well and perhaps give some more of the cyclical sectors a bounce this morning. It's solid, not stellar, but that's what the market has needed.”
The figures will help reassure policy makers that companies are staying the course on hiring in the face of weaker profits and overseas developments such as Britain's vote to leave the European Union. Federal Reserve officials flagged concern over job creation at their last meeting, signaling fading urgency for the need to increase interest rates.
The S&P 500 has erased most of its selloff following the U.K.'s vote two weeks ago to leave the European Union. While optimism that central banks will loosen monetary policy to limit the fallout of Brexit has helped the gauge rebound 4.9 percent since June 27, renewed global-growth concerns weighed on stocks this week. That's put the benchmark on course for a fourth weekly drop in the last five.
The one-two punch from May's weak employment report and the U.K.'s vote to secede all but erased any wagers on a Fed rate increase this month, after probabilities for a move were 55 percent at the beginning of June. Traders are pricing in less than even odds of a boost to borrowing costs until at least the end of 2017.
Investors are also waiting for cues on the health of corporate America, with Alcoa Inc. unofficially kicking off the second-quarter earnings season next week. Analysts predict profits will drop 5.4 percent at S&P 500 firms, which would make it the fifth straight quarterly decline, the longest streak since 2009.
To contact the reporters on this story: Camilla Naschert in London at cnaschert1@bloomberg.net, Dani Burger in New York at dburger7@bloomberg.net. To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net, John Shipman, Namitha Jagadeesh
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