NEW YORK (AP) Apple was leading a widespread rally on Wall Street after the most influential stock market company reported better-than-expected earnings. Shares of battered banks also surged on Friday to recoup some of their heavy losses from a brutal week. The S&P 500 rose 1.8%. The Dow Jones Industrial Average rose nearly 550 points and the Nasdaq composite tumbled 2.2%. Treasury yields jumped in the bond market after a report showed hiring picked up across the economy far more than expected last month. The government’s jobs report also showed that workers had won bigger-than-expected pay rises.
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NEW YORK (AP) Apple is leading Wall Street to its biggest rally in nearly four months on Friday after the market’s most influential company reported better-than-expected earnings. Shares of battered banks are also jumping to recoup some of their steep losses from a brutal week.
The S&P 500 was up 2.1%, although still on pace from a losing week. The Dow Jones Industrial Average rose 599 points, or 1.8%, to 33,725, with around an hour of trading, while the Nasdaq composite was up 2.4%.
Treasury yields jumped in the bond market after a report showed accelerated hiring in the economy as a whole by much more than expected last month. The US government’s jobs report also showed workers won bigger-than-expected wage increases in April.
While this is good news, especially when many economists fear a recession is coming this year, the data also raises fears that inflation will remain high and push the Federal Reserve to keep interest rates higher. This would keep pressure on an already slowing economy.
The data has done little to narrow the extremely wide range of possibilities for the economy that investors predict for the economy, from a painful recession to a soft landing, said Bill Northey, managing director. investments at US Bank Wealth Management.
Today’s jobs report likely gave bulls and bears something to anchor around, he said.
High interest rates have already caused cracks in the american banking system, and fears of the next drop rocked the industry. This week began with regulators’ seizure of First Republic Bank, which became the third failure of a major US bank to be affected since March.
Investors searched for the next possible weak link in the system and drove down stock prices for those at risk of a sudden exodus of customers. It was even when banks protested that they saw deposit levels stabilizing or strengthening. Several of the hardest hit recovered some of their heavy losses on Friday, adding to the seething atmosphere.
PacWest Bancorp climbed 85.2%, although it was still down 42.2% for the week. Western Alliance Bancorp gained 44.8% to reduce its loss for the week to 29%.
The worry is that falling bank stock prices could create a vicious circle that would cause customers to lose confidence and withdraw their deposits, which would then increase fear for the system.
Apple didn’t rise as much as those banks on Friday, but its moves pack a bigger punch. Apple is Wall Street’s most valuable stock, giving its moves an outsized weight on the S&P 500 and other indexes.
Its 5% gain made it the biggest lifting force in the S&P 500. The iPhone maker reported lower earnings and revenue, but the results still beat analysts’ expectations.
The story was similar across the earnings market in the first three months of the year. Analysts entered this earnings season with very low expectations given high interest rates and a slowing economy, but the majority of companies did better than expected.
Live Nation Entertainment jumped 15.3% after reporting a smaller loss than analysts expected, while Cigna Group rose 7.6% after beating profit and revenue forecasts.
On the losing side was Lyft, which fell 21% after giving a weaker current-quarter earnings forecast than Wall Street expected. That’s a contrast to competitor Uber, which is solidly up for the week following its earnings report.
In the bond market, yields jumped immediately after the jobs report, with traders betting on it pushing the Fed to keep rates high longer than expected.
The Fed said Wednesday it was unsure of its next move after raising its benchmark rate to a range of 5% to 5.25% from virtually zero at the start of last year. It has raised rates at the fastest rate in decades to bring inflation down, but it works by slowing the economy and affecting investment prices.
Many traders expect the Fed to hold rates steady at its next meeting in June, which would be the first time this has happened in over a year. After that is where expectations diverge.
The Fed has insisted it sees inflation coming down slowly, which would mean rates would stay high for some time, or even rise further if inflation were to pick up again. Many traders, meanwhile, see the economy weakening so much that the Fed will have to cut rates later this year.
Adding to the uncertainty is what is emerging from the turmoil in the US banking sector. If this causes the banks to reduce their lending, it could act as rate increases which further stifle the economy.
Friday’s jobs report offered both encouraging and discouraging news, according to the outlook.
Strong hiring figures confirm that the labor market remains resilient. This supports the rest of the economy, which has already begun to slow under the weight of much higher interest rates.
But most worrying for the pessimists was the 4.4% rise in workers’ wages over the previous year. The fear is that too steep wage increases could cause companies to raise the prices of their own goods and take other actions that would create a vicious circle that would keep inflation high. This in turn could put pressure on the Fed to keep rates higher for longer, which would cause more things other than the First Republic to break.
The 10-year Treasury yield rose to 3.44% from 3.38% on Thursday evening. It helps set the rates for mortgages and other large loans.
AP Business Writers Joe McDonald and Matt Ott contributed.
