Stocks bounce back, Canadian dollar drops after jobs miss

Friday brought some relief to U.S. equity investors. The previous session's decline, driven by worries about artificial-intelligence revenue, was followed by gains across all five major indexes, with the Dow posting the biggest percentage advance.

The data flow was less upbeat. U.S. consumer sentiment came in below expectations, while inflation expectations ticked up. Canada shed 68,300 more positions, which weighed on the Canadian dollar. Even so, equities, precious metals and Bitcoin all moved higher heading into the weekend.

The dollar ended mixed, and the Canadian dollar was hurt by the jobs report.

The greenback closed on a mixed note, gaining about 0.25% against both the Canadian dollar and the yen and losing the most ground against the Australian dollar.

Toward the close, the major currency pairs looked like this:

• EUR/USD was at 1.1201, down 0.07%.
• USD/JPY fetched 158.26, up 0.25%.
• GBP/USD changed hands at 1.3233, gaining 0.07%.
• USD/CHF stood at 0.8300, off 0.17%.
• USD/CAD reached 1.4261, adding 0.25%.
• AUD/USD traded at 0.6985, up 0.43%.
• NZD/USD was at 0.5613, 0.05% higher.

USD/CAD climbed from roughly 1.4232 ahead of the Canadian employment release to about 1.4293 after it. A portion of that move was given back, but the Canadian dollar stayed under pressure.

The Treasury curve flattened.

Around the close, Treasury yields were split, with short maturities climbing and the 30-year drifting down:

• The 2-year yield was 4.7911%, up 3.51 basis points.
• The 5-year yield came in at 5.0211%, 3.01 basis points higher.
• The 10-year yield stood at 5.2441%, adding 1.11 basis points.
• The 30-year yield slipped 0.69 basis point to 5.6001%.

That mix pushed the curve flatter. With short-term inflation expectations climbing, traders had fresh cause for caution on the inflation front despite softer consumer sentiment.

Wall Street closed higher.

The main indexes all finished in positive territory:

• The Dow industrials rose 423.06 points, or 0.83%, to 51,660.18.
• The S&P 500 gained 46.18 points, or 0.59%, closing at 7,811.54.
• The Nasdaq Composite added 172.83 points, or 0.64%, to 27,366.17.
• The Russell 2000 advanced 12.8535 points, or 0.46%, to 2,806.9815.
• The Nasdaq 100 climbed 157.34 points, or 0.51%, to 30,883.15.

The rally was not confined to tech, as the Dow's outperformance and small-cap participation demonstrated. Even so, a single upbeat day did little to settle the debate over artificial-intelligence investment, revenue and valuations.

Adam's afternoon review pointed out that the OpenAI revenue comparison from Thursday had to be adjusted for partner revenue. He also observed that the dollar declined together with AI stocks in the first response, an atypical move for a currency that usually gains when risk appetite weakens. That dynamic is worth monitoring.

It is.

European equity markets also ended Friday in the green:

• Germany's DAX rose 1.13% to 25,087.28.
• France's CAC climbed 0.95% to 7,803.34.
• The UK's FTSE 100 added 1.06%, closing at 10,552.04.
• Spain's IBEX gained 0.55% to 19,033.10.
• Italy's FTSE MIB advanced 0.91% to 49,746.30.

Friday's advance did not prevent weekly declines in most European markets. Italy fell 1.46% for the week, France dropped 1.19%, Germany lost 0.57% and Spain slipped 0.27%. Britain went against the trend, adding 0.86%. Political unrest and fiscal worries in France stayed part of the regional picture.

Consumer sentiment slipped while inflation expectations moved higher.

The University of Michigan's preliminary October consumer sentiment reading dropped to 46.3 from 48.1, missing the 47.8 forecast.

The current conditions gauge was notably soft at 44.7 against a 51.0 projection. Expectations, however, topped the estimate, coming in at 47.3 versus 45.5.

What most concerns the Federal Reserve is the inflation expectations component:

• One-year expectations rose to 4.7% from 4.6%.
• Five-year expectations moved up to 3.5% from 3.4%.

Households are growing more gloomy even as they anticipate steeper prices. That leaves officials in a difficult spot, though whether the anxiety exceeds the actual situation is an open question. The overall index was still severely depressed, but it stayed above the 44.8 May trough mentioned in the report. CPI and PPI figures are due next week, and together they will feed into the PCE calculation.

Canada posted another 68.3K job loss.

Canada's September jobs data showed a drop of 68,300, missing forecasts that had called for a 9,200 gain. Combined with August's 41,700 decline, the two-month total loss was 110,000.

Full-time positions dropped by 35,400, while part-time work fell by 32,900. Unemployment moved up to 6.5% from 6.4%, and the participation rate dipped to 64.8% from 65.0%. The drop in participation kept unemployment from rising more.

The poor headline number came with caveats. Public-sector employment contracted by 70,000, whereas private-sector employment increased by 24,100. Declines in education and youth hiring also cast doubt on seasonal adjustments tied to the back-to-school period.

Still, another steep drop in employment is hard to brush aside. Wage growth for permanent employees accelerated to 2.3% from 2.0%, complicating matters for the Bank of Canada.

Oil was little changed, with Iran still a weekend risk.

In the provided snapshot, WTI crude futures traded near $91.50, an increase of $0.01, or 0.01%.

Earlier, President Trump said talks with Iran had been productive and that strikes on Tehran would be put off until after the midterm elections, which offered some relief. That tempered the immediate escalation premium, but the underlying conflict and supply risks remained unresolved.

Baker Hughes' afternoon count put total U.S. rigs 5 higher at 603, with oil rigs up 6 to 462.

Gold and silver moved ahead.

Late-session figures showed precious metals firmly higher:

• Spot gold rose $62.375, or 1.51%, to $4,196.065.
• Silver gained $1.6107, or 2.72%, trading at $60.7912.

Gold moved higher even with yields up on the 2-, 5- and 10-year maturities. The dollar's mixed tone and a modest dip in the 30-year yield made for a less consistent headwind, yet the metal's strength hints at buying beyond a basic rates trade. Higher inflation expectations could have played a role, though the snapshot by itself does not prove the cause.

Bitcoin inched up.

Bitcoin was around $82,316, ahead by $640, or 0.78%.

The advance aligned with the equity rebound. Risk assets had a better session, though bitcoin's move did not set it apart from the broader market.

What might matter next week?

Equities regained ground, yet worries about inflation and the economics of AI persist. Currency traders now have Canada's soft jobs picture to weigh, while Middle East headlines could still shift sentiment during the weekend.

Monday is shaping up as a mixed holiday session: U.S. equities operate on a normal schedule, U.S. bond trading is shut, and Canadian markets are closed for Thanksgiving. That could leave conditions thinner as the week starts.