U.S. stock index futures rose sharply Friday after the July employment report showed an unexpected job loss, immediately shifting market expectations for Federal Reserve monetary policy.
The labor market contraction led Wall Street to increase bets on an interest rate cut, with traders now anticipating a less hawkish stance from the Fed. The July figures dampened expectations for a September rate hike. The Federal Reserve has maintained a data-dependent approach to policy, and a weakening labor market typically signals reduced inflationary pressures.
S&P 500 futures climbed after the report's release as market participants priced in a higher probability of rate reductions. Lower borrowing costs tend to support equity valuations.
Despite the futures rally, major U.S. equity indices largely traded lower on the day. The S&P 500 stood at 7,710, down 0.2 percent. The Dow Jones Industrial Average dropped 0.9 percent to 53,885.
Commodity markets also reacted to the revised rate outlook. West Texas Intermediate crude futures for September delivery rose 0.8 percent to $77.91. Brent crude, the international benchmark, climbed 1.1 percent to $83.40.
Gold prices advanced on the news, benefiting from altered interest rate expectations. The precious metal is on track for its best week since January. Lower interest rates tend to boost demand for non-yielding assets like gold.
Separately, strong forecasts from Microchip Technology and Atlassian lifted chip and software shares earlier in the session. Microsoft rose 2.5 percent to $499.86. Apple gained 0.5 percent to $312.41.
