U.S. payrolls shrank in July, but markets still price a December Fed hike as the labor report only delays timing.
The Dow Jones Industrial Average edged up 65 points, or 0.1%, to near 54,000 after U.S. payrolls contracted in July, marking a muted equity response to weaker labor data. The session high of 54,100 came shortly after the 12:30 GMT release but failed to sustain momentum.
Rate futures adjusted odds for a September hike, with the 16 September meeting now showing a 44.1% chance of a quarter-point increase, down from 59.2% a week ago. However, a December rate hike remains fully priced, with the probability of the current 3.50%-3.75% range holding at zero for the 9 December meeting.
Bond markets reacted along the yield curve, with two-year notes rallying over four basis points to 4.204%, while the thirty-year yield moved less than one basis point to 5.208%. The split reflects near-term dovishness but unchanged long-term expectations.