US stocks notched a record close on Friday in what proved to be a volatile day in financial markets following a much weaker than expected jobs report.

US employers hired 266,000 new workers in April, according to the labour department’s monthly non-farm payrolls report — far below the level of at least 1m jobs that economists had expected.

“Today put some caution on the notion that the economy is overheating,” said Priya Misra, head of global rates strategy at TD Securities.

She said the data reiterated that the US had a long road to recovery and that it reduced “pressure on the Fed to start to think about taper and the exit from monetary accommodation”.

US equities advanced with the blue-chip S&P 500 notching a record close up 0.7 per cent to 4,232.60, led by the energy and real estate sectors. The Nasdaq Composite index gained 0.9 per cent. For the week, the indices were up 1.2 per cent and down 1.5 per cent respectively.

US Treasury bonds initially rallied, with the yield on the 10-year note falling by a steep 0.07 percentage points to 1.497 per cent in the moments after the data were released. Bond yields move inversely to prices. Later, the 10-year yield was up 0.02 percentage points on the day at 1.578 per cent.

The dollar, as measured against a basket of currencies, fell by 0.8 per cent.

Asset managers said they were stunned by the wide margin between the payroll numbers and expectations of large groups of economists surveyed by financial data providers ahead of the report.

The US economy grew by 6.4 per cent in the first quarter of the year, thanks to trillions of dollars in government stimulus spending and a rapid coronavirus vaccination programme, prompting analysts to expect hiring to follow suit.

“This is bad news. This is worse than my worst expectations of this jobs print,” said Jeffrey Schulze, investment strategist at ClearBridge Investments in New York.

“There may be a substantial negative supply shock in the labour markets, which is larger than we really anticipated,” he added, although this could also be “transitory” as more people received Covid-19 vaccinations and US schools fully reopened.

“I find it mind-boggling that the forecasts could have got it so wrong,” added Tatjana Greil-Castro, co-head of public markets at credit investment group Muzinich.

It was possible that there had been “a timing issue and we see the big job growth number next month”, she added, though the data were making decisions about investing in US assets “much harder”.

Still, “the more time the market has to digest [the] report the more the report seems a bit of an anomaly relative to other data”, said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors. “It’s hard to imagine in the next couple of months where the economy doesn’t continue to recover.”

Elsewhere in markets, Brent crude, the international oil marker, was 0.7 per cent lower at $67.49 a barrel after the jobs data, before recovering to trade 0.2 per cent higher at $68.30 a barrel.

In Europe, the Stoxx 600 index gained 0.9 per cent, led higher by utilities and tech shares.

Sterling gained 0.7 per cent against the dollar to purchase $1.398. The euro climbed 0.7 per cent higher to $1.215.