A hotter-than-expected jobs report spurred a premarket rally on Wall Street Friday, showcasing the U.S. economy’s resilience and easing concerns over an economic slowdown.

The strong labor data also led traders to rethink the Federal Reserve’s aggressive rate cuts, resulting in a jump in the dollar and Treasury yields.

What Happened: The U.S. economy added 254,000 jobs in September, far exceeding the expected 140,000. This marks an acceleration from August’s 159,000 figure and well above the 12-month average of 230,000. Payrolls for both July and August were upwardly revised by 55,000 and 17,000, respectively.

Private sector payrolls accounted for 223,000 jobs, while the government added 31,000. The unemployment rate fell unexpectedly by 0.1% to 4.1%, beating the forecasted 4.2%.

Wages grew by 0.4% in September, surpassing the expected 0.3%.

Why It Matters: The stronger-than-expected pace of job addition, coupled with a surprisingly lower unemployment rate and higher wage growth, signals a strong consumer spending outlook, which could lift corporate earnings, particularly as we head into the fourth quarter.

Yet the labor market’s strength also complicates the Federal Reserve’s efforts to curb inflation. Higher wages could stoke consumer demand, putting upward pressure on prices, potentially slowing disinflation efforts. This may lead the Fed to delay or scale back anticipated interest rate cuts.

Before the jobs report, the market had priced in a 30% chance of a 50-basis-point rate cut in November, according to the CME FedWatch Tool. Following the data release, those odds plummeted to 11%.

Market Reactions:

• The SPDR S&P 500 ETF Trust SPY jumped 0.9% in premarket trading, edging closer to its recent record highs.
• The Invesco QQQ Trust QQQ, which tracks major tech stocks, rallied 1.4%, driven by strong gains in the semiconductor sector. The iShares Semiconductor ETF SOXX surged 2.1%.
• Blue chips rose as well, with the SPDR Dow Jones Industrial Average ETF DIA up by 0.7%.
• Small caps outperformed large caps. The iShares Russell 2000 ETF IWM rallied 1.7%.
• Yields on the 10-year Treasury bond soared by 11 basis points to 3.96%. Yields on the policy-sensitive two-year note spiked by 15 basis points to 3.87%.
• The iShares 20+ Year Treasury Bond ETF TLT tumbled 1.2%.
• The U.S. Dollar Index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, rose 0.7%.

Top Gainers Post-Jobs Report:

Using the Movers function on Benzinga Pro, here are the top performers among U.S. mega-cap stocks in the 30 minutes following the release of the September jobs data.

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