Wall Street capped a choppy week of trading Friday with the best stock market day in more than two months, as traders welcomed colder-than-expected U.S. jobs data, a sign that inflationary pressures on the economy are escalating. attenuate.
The S&P 500 rose 1.3%, its best day since late February. The benchmark index also erased its losses for the week.
The Dow Jones Industrial Average rose 1.2%. The Nasdaq Composite Index ended up 2%, reflecting strong gains in technology sector stocks, which accounted for much of the gain.
Employers nationwide added 175,000 jobs last month, down sharply from March's dramatic increase of 315,000, according to the Labor Department. The latest hiring figure is well below the 233,000 gains forecast by economists. At the same time, the average hourly wage, one of the main drivers of inflation, rose less than expected.
The slight increase in hiring last month suggests that the Federal Reserve's aggressive series of rate hikes may finally start to have a heavier impact on the world's largest economy. This could help reassure the Fed that inflation will fall further, which could bring it closer to lowering interest rates.
Demand for labor is slowing, which will eventually ease inflationary pressures, giving the Fed some room to cut rates later this year, said Jeffrey Roach, chief economist at LPL Financial. Slower payroll growth and fewer hours worked imply that the economy is slowing at a measured pace. This jobs report is consistent with the narrative of a soft landing.
Treasury yields in the bond market mostly fell following the jobs report. The yield on the 10-year Treasury note, which lenders use as a guide for pricing home loans, fell to 4.5% from 4.59% late Thursday. The two-year yield, which is closer to the Fed's expectations, fell to 4.81% from 4.88%.
The American economy is in a difficult situationwhere it is hoped that it will remain strong enough to avoid a recession, but not so strong as to make the situation worse. progress on inflation has already stalled.
This is essentially the soft landing the Fed hopes to achieve as it attempts to return the inflation rate to its 2% target.
Consumer inflation stood at 3.5% in March, well below the peak of 9.1% almost two years ago.
Stubbornly high inflation figures this year have been pushed Federal Reserve Chairman Jerome Powell will say this on Wednesday that it will likely take longer than expected to gain enough confidence in slowing inflation to justify cutting interest rates.
Some of the data from the jobs report softens that narrative somewhat, said Charlie Ripley, senior investment strategist at Allianz Investment Management. They want to lower interest rates, but they need to have more confidence in inflation data and today's wage data gives them a little more confidence.
The Fed's main interest rate is at its highest level since 2001, and cuts would ease some pressure on the economy and financial markets.
The benchmark S&P 500 index fell 4.2% in April, its first monthly loss since October, as signals of stubbornly high inflation forced traders to lower their expectations for when the Fed could start easing interest rates.
After entering the year plan for six or more If there is a rate cut in 2024, traders are now largely betting on one or two, or none at all, according to CME Group data.
The market rally Friday was broad-based, although technology stocks fueled much of the gains. Apple jumped 6% after announcing a massive $110 billion stock buyback. The tech giant reported late Thursday its biggest quarterly decline in iPhone sales since the start of the pandemic.
Microsoft rose 2.2% and Nvidia 3.5%.
Several companies posted gains after reporting strong quarterly results.
Amgen soared 11.8% after the biotechnology company provided investors with an encouraging update on a potential obesity drug. Live Nation Entertainment added 7.2% after the ticket seller and concert promoter beat analysts' revenue forecasts for the first quarter.
Motorola Solutions closed 5.2% higher after the communications equipment maker raised its profit forecast for the year.
Booking Holdings rose 3% after reporting better-than-expected bookings and revenue in the first quarter. Another online travel company, Expedia Group, hasn't fared as well, despite its latest quarterly results beating Wall Street targets.
Its shares fell 15.3%, the biggest decline among S&P 500 stocks after it lowered its full-year bookings forecast as its Vrbo rental unit was slow to recover from its migration to the Expedias platform.
Overall, the S&P 500 rose 63.59 points to 5,127.79, while the Dow gained 450.02 points to 38,675.68. The Nasdaq gained 315.37 points to close at 16,156.33.
In Europe, Germany's DAX gained 0.6%, while the CAC 40 in Paris rose 0.5% and London's FTSE 100 gained 0.5%.
Markets in Tokyo and mainland China were closed for holidays.
The Japanese yen appreciated slightly against the dollar.
