Stocks jumped sharply Friday after a softer-than-expected April jobs report boosted hopes that the Federal Reserve could start cutting interest rates soon.
The Dow Jones Industrial Average
gained 450.02 points, or 1.18%, to settle at 38,675.68. The S&P 500
surged 1.26% to finish at 5,127.79 and notch its best day since February, while the Nasdaq Composite
rallied 1.99% to close at 16,156.33.
All the averages capped off a winning week. The Dow and Nasdaq rose 1.14% and 1.43%, respectively, while the S&P 500 added 0.55%.
Friday’s nonfarm payrolls report showed 175,000 jobs gained in April, below the 240,000 jobs expected by economists surveyed by Dow Jones. The unemployment rate edged up to 3.9%, versus 3.8% in the prior month, according to the Bureau of Labor Statistics. Wage figures also came in less than expected, an encouraging sign for inflation.
“It’s really eased investors’ fears that the economy may be overheating or reaccelerating, and it’s reviving hope for rate cuts,” said John Hancock Investment Management’s co-chief investment strategist Emily Roland. “That’s why rates are falling, bonds are rallying and equity markets are up. Bad news for the jobs market, means the Fed may be able to start cutting later this year.”
Following April’s weaker-than-expected job growth and moderating wage gains, traders are pricing in a second rate cut by the end of the year. Fed funds futures trading data suggests a nearly 50% likelihood of a a 25 basis point rate cut in September, according to the CME Group’s FedWatch tracker of futures market pricing.
Rates also dropped following the labor report, with the 10-year Treasury yield briefly falling below 4.5%. The movement benefited rate-sensitive megacap technology stocks, with Nvidia and Advanced Micro Devices advancing more than 3%. Microsoft and Meta Platforms gained 2% each, while the S&P’s information technology sector surged 3%.
Strong quarterly reports from major Dow components also contributed to Friday’s rally. Apple
advanced nearly 6% after it announced a $110 billion share repurchase and a top -and bottom-line beat. Biotech stock Amgen
surged nearly 12% after posting better-than-expected earnings and offering a positive update on an experimental obesity drug. Shares notched their best day since 2009.
