US open: Stocks tumble in wake of 'disappointing' non-farm payrolls

US stocks were down on Friday in the wake of an expected downturn in employment numbers for the third straight month in September, lowering the chances of an interest rate hike in November.

The Dow Jones Industrial Average dropped 0.17% to 18,236.79 points, the S&P 500 declined 0.13% to 2,157.96 points and the Nasdaq fell 0.16% to 5,298.39 points at 1445 BST.

Stocks tumbled after data showed the US economy added jobs at a slower than expected pace and the unemployment rate showed an unexpected increase from 4.9% to 5%. Non-farm payrolls rose by 156,000 in September from 167,000 in August, below market expectations of a 175,000 increase.

The non-farm report is the last one published until the Federal Reserve policy meeting on 1-2 November and in the run-up to the 8 November presidential election a rate hike seems dubious.

Fed chair Janet Yellen previously said she would likely raise interest rates this year and it is suggested it could come at the last policy meeting in December.

Chris Williamson, chief business economist at IHS Markit, said the "disappointing" September employment report is a setback for those who were banking on a Fed rate rise later this year, but it has not shut the door on a December hike.

He said: “Today’s data are not weak enough to substantially alter the underlying picture of the Fed’s next move being one of tightening policy. It likely remains just a case of when, rather than whether, rates will rise.

“While a November rate hike therefore looks highly unlikely, given the proximity of the election and signs of a current weak-spot in the economy persisting into the third quarter, an election result that is positively received by the markets and business leaders will most likely pave the way for a December Fed rate hike, providing the economic data flow does not deteriorate further in the meantime.”

Meanwhile, oil prices were slightly lower but remained above the $50 a barrel mark following reports that some OPEC members and Russia will meet next week to talk about Russia’s involvement in cutting production.

West Texas Intermediate was down 0.31% to $50.28 per barrel and Brent crude was lower by 0.38% to 52.31 at 1459 BST.

On companies, shares in multinational manufacturer Honeywell International slid 7.65% to 106.78 cents at 1018 EDT after the company cuts its projection for sales due to a business slowdown.

Fashion retailer Gap’s shares soared 15.63% to 26.34 cents at 1020 EDT after it reported that margins in September were significantly higher than previously forecast despite a fire at its distribution centre in Fishkill, New York.