What's Behind The Strong Dollar?

By Nicholas Jasinski | Thursday, October 7

Crisis Delayed. Stock indexes jumped today, as Congressional leaders came together on a debt-ceiling compromise and investors looked ahead to tomorrow's September jobs numbers.

The Dow Jones Industrial Average and Nasdaq Composite each added about 1%, while the S&P 500 gained 0.8%. All but one of the 11 sectors of the S&P 500 closed in positive territory, with only defensive utilities declining.

Democratic and Republican party leaders essentially agreed to kick the can down the road today, with a deal to lift the U.S. federal government's debt limit by $480 billion. That extra borrowing power is meant to tide the Treasury Department over only until Dec. 3, when the government's recently extended budget expires.

A long-term deal remains elusive, and we may be back to the debt-limit fight six weeks from now. 

For now, at least, it avoids a potential U.S. sovereign debt default that could have come as soon as Oct. 18. That tail risk had been among the factors weighing on stocks in recent weeks.

All eyes tomorrow will be on the September jobs report, out at 8:30 a.m. Eastern. Investors and economists will be interested in learning more about the pace of hiring during the Delta wave of Covid-19, and how far along various industries are in their recoveries.

The numbers tomorrow will also be closely scrutinized for their implications on Federal Reserve policy. At the Fed's latest policy committee meeting, officials suggested that the first step away from its maximum monetary policy support for the economy—tapering of monthly asset purchases—could begin in November or December.

A strong or weak jobs number tomorrow could tip the balance toward an earlier or later start to that process. The Federal Open Market Committee next meets from Nov. 2-3, meaning tomorrow's employment update will be the last one that officials see before deciding. As my colleague Randy Forsyth recently said: "It's the most important monthly jobs report since last month's jobs report."

Economists' average forecast is for a gain of about 488,000 nonfarm payrolls in September, according to FactSet. That would follow a 235,000 increase in August, which fell well short of expecations.

Barron's Matt Smith has four key things to watch in tomorrow morning's jobs report.

DJIA: +0.98% to 34,754.94
S&P 500: +0.83% to 4,399.76
Nasdaq: +1.05% to 14,654.02

The Hot Stock: Freeport-McMoRan +8.2%
The Biggest Loser: Pinnacle West Capital -8.1%

Best Sector: Consumer Discretionary +1.6%
Worst Sectors: Utilities -0.5%