Stocks rose on Wall Street on Friday after a strong report from the US job market suggested a recession may not be as close as investors had feared. In contrast, with the results of the past few weeks, Wall Street appeared to be on the verge of a bull market, one that saw prices steadily rise for some time.
The S&P 500 gained 1.5% and is already up 20% from October’s low. That puts Wall Street’s key health indicator on the verge of entering what has been called a “bull market” despite a long list of challenges.
The Dow Jones Industrial Average rose 2.1%, while the Nasdaq Composite Index closed 1.1% higher.
He was promoted after a report employers unexpectedly cut his hiring last month. It’s the latest sign that the job market remains remarkably strong despite very high interest rates, providing a solid pillar of support for a slowing economy.
Perhaps more importantly for the markets, the monthly employment report from the Labor Department also showed that growth in workers’ wages slowed even as hiring picked up.
While this may discourage workers trying to keep prices at the register, investors believe that slower wage growth should mean less inflationary pressure in the economy.
This, in turn, could allow the Federal Reserve to relax its interest rate hikes with the aim of reducing inflation. Higher rates do this by slowing the economy and hurting investment prices, and have already hurt the banking and manufacturing industries.
The unemployment rate also rose more than expected last month to a five-decade low of 3.7%. It signals some further sluggishness in the job market and struggles with exceptional hiring numbers, the data for which comes from a separate survey.
“The reality is probably somewhere in the middle,” said Brian Jacobsen, chief economist at Anex Wealth Management. “One surprising thing is that if you compare today’s total payrolls to the pre-COVID trend, we still have over four million jobs lost,” he said. “Covid led to strange times, a strange recovery, and a stranger recession.”
Following the report, traders broadly expected the Federal Reserve to hold interest rates steady at its next meeting in two weeks’ time. If it does, it would be the first time it hasn’t raised rates in more than a year.
The pause in rate hikes will give breathing room to an economy that is already seeing manufacturing contract sharply for months. The higher rates have also hurt many small and medium-sized banks, as their customers have withdrawn deposits in money market funds in search of higher interest.
Several high-profile bank failures have roiled markets since March, prompting Wall Street to look for other potentially weak links. Many of those who came under the most scrutiny gathered after the labor report.
But Fed officials have also warned recently that holding off on raising rates in June doesn’t necessarily mean the end of rate hikes.
Traders expect the Fed to follow June’s pause with a July interest rate hike, according to data from CME Group. This helped raise Treasury yields.
The yield on the 10-year Treasury note rose to 3.69% from 3.60% on Thursday afternoon. It helps set rates for mortgages and other prime loans.
The yield on the two-year Treasury note, which moves higher based on expectations of Fed action, rose to 4.51% from 4.34%.
Also helping support Wall Street was the fact that the Senate on Thursday night gave final approval to a deal that would allow the US government to avoid a potentially devastating default on its debt. The move was widely anticipated by investors, and the agreement now heads to President Joe Biden’s signature.
(With inputs from AP)
The United States Senate approved the agreement that suspends the debt ceiling and will send it to Biden for his signature