U.S. stocks recovered some ground on Friday, with all five major indexes ending higher and the Dow leading gains. Softer-than-expected consumer sentiment and rising inflation expectations tempered the move, while a surprise loss of 68,300 Canadian jobs put pressure on the loonie. Gold, silver and bitcoin also advanced ahead of the weekend as markets weighed inflation data, AI-related valuations and developments in the Middle East.
Canadian jobs report pushes the loonie lower
The U.S. dollar was mixed, rising about 0.25% against both the Canadian dollar and the yen while slipping against the Australian dollar. Late-day quotes showed EUR/USD at 1.1201, down 0.07%; USD/JPY at 158.26, up 0.25%; GBP/USD at 1.3233, up 0.07%; USD/CHF at 0.8300, down 0.17%; USD/CAD at 1.4261, up 0.25%; AUD/USD at 0.6985, up 0.43%; and NZD/USD at 0.5613, up 0.05%.
Before Canada's employment report, USD/CAD was near 1.4232. It climbed to almost 1.4293 after the release, then gave back some of the move, leaving the Canadian dollar weaker overall. The steep employment decline has sharpened questions about the Canadian economy's momentum and added to the Bank of Canada's policy trade-offs.
Canada loses 68,300 jobs in September
Employment fell by 68,300 in September, far below expectations for a gain of 9,200. After a decline of 41,700 in August, employment was down by a combined 110,000 over the two months. Full-time jobs fell by 35,400 and part-time jobs by 32,900. The unemployment rate rose from 6.4% to 6.5%, while the participation rate slipped from 65.0% to 64.8%, limiting the increase in unemployment.
The breakdown was uneven: public-sector employment fell by 70,000, while private-sector employment rose by 24,100. Declines in education and youth employment also drew attention to seasonal adjustments and the return to school. Even so, the two-month drop in employment was substantial. Wage growth for permanent employees accelerated from 2.0% to 2.3%, adding another factor for the Bank of Canada to weigh in assessing the labour market and inflation.
U.S. Treasury curve flattens
Treasury yields ended mixed, with short- and intermediate-term yields higher and the 30-year yield slightly lower. The two-year yield rose 3.51 basis points to 4.7911%; the five-year gained 3.01 basis points to 5.0211%; and the 10-year increased 1.11 basis points to 5.2441%. The 30-year yield fell 0.69 basis points to 5.6001%. The move left the yield curve flatter.
The University of Michigan survey showed inflation expectations rising again, keeping inflation concerns in focus for traders. U.S. consumer price index (CPI) and producer price index (PPI) releases are due next week. Both will also help inform estimates of the personal consumption expenditures (PCE) price index.
Sentiment misses estimates as inflation expectations rise
The University of Michigan's preliminary October consumer sentiment index came in at 46.3, below expectations of 47.8 and the previous reading of 48.1. The current conditions index dropped to 44.7, well short of the 51.0 forecast, while the expectations index rose to 47.3, above expectations of 45.5. The headline measure remained low but was above the May low of 44.8 cited in the report.
Consumers' one-year inflation expectations rose from 4.6% to 4.7%, and their five-year expectations increased from 3.4% to 3.5%. The combination of weaker sentiment and higher price expectations presents policymakers with competing signals: households feel worse about current conditions but remain concerned about future inflation.
All five major U.S. indexes advance, led by the Dow
U.S. stocks rebounded Friday after falling a day earlier on concerns about the revenue outlook for artificial intelligence. The Dow Jones Industrial Average gained 423.06 points, or 0.83%, to close at 51,660.18. The S&P 500 rose 0.59% to 7,811.54, and the Nasdaq Composite added 0.64% to 27,366.17.
The Russell 2000 gained 0.46% to 2,806.9815, while the Nasdaq 100 rose 0.51% to 30,883.15. The advance extended beyond technology stocks: the Dow led, and small-cap shares also participated. Still, one session of gains did little to settle questions about AI spending, revenue conversion and valuations.
Comparisons involving OpenAI revenue on Thursday need to account for adjustments to partner revenue. In the market's initial reaction, the U.S. dollar fell alongside AI-related stocks. The dollar can sometimes draw safe-haven demand when risk assets decline, making the move worth watching, but a single session is not enough to establish a change in that relationship.
European shares rise, but most markets fall for the week
Major European indexes closed higher Friday. Germany's DAX rose 1.13% to 25,087.28; France's CAC 40 gained 0.95% to 7,803.34; the UK's FTSE 100 advanced 1.06% to 10,552.04; Spain's IBEX 35 added 0.55% to 19,033.10; and Italy's FTSE MIB climbed 0.91% to 49,746.30.
Despite Friday's rebound, most of the markets ended the week lower. Italy fell 1.46% for the week, France lost 1.19%, Germany slipped 0.57% and Spain declined 0.27%. The UK was the exception, gaining 0.86%. Domestic turmoil in France and fiscal uncertainty remained part of the backdrop for European markets.
Oil steady as gold, silver and bitcoin gain
WTI crude futures were last near $91.50 a barrel, up $0.01, or 0.01%. U.S. President Donald Trump said discussions with Iran were progressing positively and that attacks on Tehran would be delayed until after the midterm elections. The remarks eased immediate concerns about escalation but did not remove uncertainty around the conflict or energy supplies.
Baker Hughes data showed the U.S. rig count rising by five to 603. Oil rigs increased by six to 462. Precious metals advanced: spot gold rose $62.375, or 1.51%, to $4,196.065, while silver gained $1.6107, or 2.72%, to $60.7912. Gold rose even as two-, five- and 10-year Treasury yields climbed. A mixed dollar, a slight decline in the 30-year yield and changing inflation expectations formed part of the day's backdrop, but the session alone does not identify a single main driver.
Bitcoin was last around $82,316, up $640, or 0.78%, in the same direction as equities. The day's moves pointed to a firmer tone across risk assets but did not show that bitcoin had decoupled from broader markets.
U.S. and Canadian holiday schedules diverge Monday
Markets will focus next week on U.S. inflation data and assess what weaker Canadian employment may mean for the loonie and the Bank of Canada's policy outlook. Weekend developments in the Middle East may also shape sentiment in energy markets at the start of the week.
U.S. stock markets will trade as usual on Monday, but U.S. bond markets will be closed. Canadian markets will also be closed for Thanksgiving. With the two countries on different schedules, liquidity and trading patterns may differ from a normal session.