On Friday, the Dow Jones Industrial Average closed lower after the U.S. announced that it had added fewer jobs than expected. Oil prices was another contributing factor that spooked a lot of investors and put them towards the sidelines. Even the expectation of a Fed rate hike in December was enough to keep the Dow from posting any gains. The Dow Jones closed lower by 0.15% to 18,240.49.

Jobs Expectations

The Dow started out the gate strong along with all the other indices, but pared gains as soon as the jobs report was released. The U.S. Labor Department said that the U.S. economy added 156,000 jobs for the month of September. There are two problems wrong with this number. The first being that it came in below expectations. Economists expected that there would be at least 172,000 jobs added for the month. It is never a good sign when jobs comes in below expectations as it did in this report. The second problem is that the unemployment rate ticked up to 5%. The market perceived the uptick in the unemployment as purely negative, but there is a connotation behind it. The reason for the uptick in the rate was because more people joined the labor force. In other words, labor force participation increased. That’s a good sign that the amount of jobs being created might be increasing.

Oil Weighs Heavily

Oil traded lower thanks to profit taking, and skepticism that an oil deal may not be plausible at this stage. What spooked markets is that Iraq and Iran will not be attending the event at Istanbul this week. This caused the Dow to close lower for the day. This meeting will not matter much because it is not the formal meeting where all the OPEC and non-OPEC producers will meet to flesh out a deal.

Still, investors took the fact that Iran and Iraq not wanting to attend is some type of indication that a deal will not be done in the coming month. That is because all the countries’ ministers are set to meet in Istanbul, Turkey in November. There, all the oil leaders will meet at the World Energy Congress to discuss plans to reduce oil output. Oil climbed ahead of this week’s meeting by 15% on optimism that a deal may eventually be reached. The price of oil also traded lower because of increased oil rigs. This phenomenon has occurred because the price of oil has managed to make its way up to $50 a barrel. In essence, a higher price in oil brings with it more rigs starting to drill. An oil field service driller, known as Baker Hughes, added new rigs in 14 of the 15 past weeks. That leaves only one week out of all of them which had no rigs added. With such a trend continuing it will bring in too much supply back into the fold. Then the cycle of of an oil glut would continue to weigh on the price of oil.

Rate Hike Looming

Despite the lower than expected jobs report, there is still a lot of belief that the Fed will move to hike rates in December. Where does this huge belief come from? This comes from a measurement tool. The CME Group’s Fed Watch Tool has market expectations of a rate hike above 60%. For those trading the Dow Jones it is important to watch how the Fed will act with respect to a rate hike. There is no doubt that a rate hike would cause the Dow to trade lower. This is because a rate hike would cause the value of the dollar to go up. When the value of the dollar goes up it causes it to become the key investment vehicle. That means traders would avoid bidding up gold, silver, copper, and stocks. Such a move would have a dramatic effect of causing the Dow Jones to trade lower.