Wall Street on Friday marked the best day for stocks in more than two months, ending Friday's eventful day as traders hailed a weaker-than-expected U.S. jobs report as a sign that inflationary pressures on the economy are easing. It concluded the week's trading.
The S&P 500 rose 1.3%, its highest since late February. Benchmark indexes also ended this week's losses.
The Dow Jones Industrial Average rose 1.2%. The Nasdaq Composite Index ended 2% higher, reflecting strong gains in technology sector stocks, which accounted for most of the gains.
The nation's employers added 175,000 jobs last month, down sharply from March's massive gain of 315,000. This was significantly lower than the 233,000 increase expected by economists. Average hourly wages in April also did not increase as expected. The report suggests that the Fed's aggressive streak of rate hikes may finally be slowing the pace of hiring.
“Slowing labor demand will ultimately ease inflationary pressures and give the Fed room to cut rates this year,” said Jeffrey Roach, chief economist at LPL Financial. “Slower employment growth and fewer hours worked suggest the economy is slowing at a steady pace. This jobs report is consistent with a soft landing story.”
U.S. bond yields in the bond market generally fell in response to the employment report. The yield on the 10-year U.S. Treasury, which financial institutions use as a guide to pricing mortgages, fell to 4.5% from 4.59% late Thursday. The yield on the two-year Treasury note, moving more in line with the Fed's expectations, fell to 4.81% from 4.88%.
The U.S. economy is in trouble and is expected to remain strong enough not to fall into recession, but not strong enough to worsen already stagnant inflation. . This is essentially the “soft landing” the Fed wants to achieve to bring inflation down to its 2% target. Consumer-level inflation was 3.5% in March, well below the peak of 9.1% nearly two years ago.
With inflation readings stubbornly high this year, Federal Reserve Chairman Jerome Powell said Wednesday it will likely take “more time than previously expected” to gain enough confidence to cut interest rates against inflation. said.
“Some of the data coming out of the jobs report weakens that story a little bit,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “They want rates cut, but they need more confidence in the inflation numbers and today's wages data should give them a little more confidence.”
The Fed's key interest rate remains at its highest level since 2001, and a rate cut would relieve some pressure on the economy and financial markets.
The benchmark S&P 500 stock index fell 4.2% in April, its first monthly decline since October. Signs of high inflation caused traders to dial back their hopes for when the Fed would start cutting interest rates.
Traders entered this year expecting at least six rate cuts in 2024, but are now betting big on just one or two, if any, cuts, according to CME Group data.
Technology stocks accounted for most of Friday's gains. Apple soared 7.2% after announcing a massive $110 billion share buyback. The tech giant late Thursday reported the steepest quarterly decline in iPhone sales since the early days of the pandemic.
Microsoft rose 2.1% and Nvidia rose 3.6%.
Several companies posted profits after reporting strong quarterly results.
Amgen rose 12.4% after the biotech company provided investors with an encouraging update on a potential obesity drug. Live Nation Entertainment rose 7.6% after the ticketing company and concert promoter beat analysts' first-quarter revenue estimates.
Motorola Solutions rose 5% after the communications equipment maker raised its profit forecast for this year.
Booking Holdings rose 3.7% after first-quarter bookings and revenue beat expectations. Expedia Group, another online travel company, also performed poorly. The company's stock fell 14.6% after its latest quarterly results beat Wall Street's targets, but for the full year as the company's Vrbo rental division has been slow to recover from its move to Expedia's platform. We have revised our reservation forecast downward.
In Europe, Germany's DAX rose 0.6%, Paris' CAC40 index rose 0.5%, and London's FTSE100 index rose 0.5%.
Markets in Tokyo and mainland China were closed for the holiday. The Japanese yen rose slightly against the dollar.
