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October jobs, Apple slides — What you need to know in markets on Friday

Myles Udland
Markets Reporter

After stocks endured one of their worst months since the financial crisis, markets got off to a strong start in November.

On Thursday, each of the major indexes closed in the green with the tech-heavy Nasdaq leading the way, rising 1.7% as the Dow and S&P 500 both gained just over 1%. The small-cap Russell 2000 was the outperformer on Thursday, rising 2.2%.

Markets on Friday will be focused, however, on Apple (AAPL), which on Thursday after the market close reported quarterly results that disappointed as the company’s iPhone sales and guidance for the current quarter came in a bit light.

In its fourth quarter ending in September, Apple reported earnings per share of $2.91 on revenue of $62.9 billion, both of which topped Wall Street estimates. The company reported that it sold 46.9 million iPhones, below expectations for the company to sell 48.4 million handsets.

In after hours trading, shares of Apple were down as much as 7%, bringing down shares of the four other FAANG stocks and weighing on Nasdaq futures. The stock’s decline after hours accelerated after the company said it would no longer be providing sales figures for iPhone, iMac, and iPad.

Investors will be very closely watching to see if Apple’s post-earnings decline persists and in the process drags down the broader market.

Major corporate earnings expected for release Friday should include ExxonMobil (XOM), AbbVie (ABBV), and Chevron (CVX).

The jobs report

The busy week of corporate news will come to an end on Friday with investors turning their attention to the U.S. economy, when the crucial October jobs report will be released.

At 8:30 a.m. ET, the Bureau of Labor Statistics will release the October employment report, which is expected to show 200,000 new jobs were created last month with the unemployment rate set to hold steady at a multi-decade low of 3.7%.

Investors will also be keeping a close eye on wage growth, with average hourly earnings expected to grow 0.2% over last month and 3.1% over last year. The 3.1% annual gain over last year would be the highest since 2009.

“We think the primary takeaway from this report will be the performance of average hourly earnings,” said Sam Bullard, senior economist at Wells Fargo.

“Shortages of labor have slowly lifted the pace of earnings growth over the past several months…a low year-ago bases will still result in average hourly earnings rising to 3.0% — the fastest pace since April 2009. Alongside the accelerated performance seen in the Employment Cost Index report (private sector wages & salaries at a 3.1% yr/yr pace–fastest since Q2 2008), the Fed will most certainly take note of this strengthening wage performance.”

Lew Alexander and the economics team at Nomura said in a note on Wednesday that the pop in average hourly earnings Wall Street expects “may not be indicative of a sudden sharp acceleration [in wage growth].” But the firm said a wage reading this strong “could create additional market anxiety about building inflationary pressures.”

And while the poor month for stocks in October was attributed to a number of factors — rising interest rates, inflation pressures, a strong dollar, slowing earnings growth, slowing economic growth, the Fed acting too quickly — strong wage readings could certainly stoke lingering investor fears about inflation.

Regardless of how the market interprets Friday’s jobs report — Is good news bad news? Good news good news? Is it a goldilocks report? — the story of a strong labor market should be the core takeaway.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland