Traders working on the floor of the New York Stock Exchange (NYSE) in New York City, USA
Brendan McDiarmid | Reuters
Stocks soared on Friday as a weaker-than-expected April jobs report raised hopes that the U.S. Federal Reserve would soon start cutting interest rates.
The Dow Jones Industrial Average rose 516 points, or 1.4%. The S&P 500 rose 1.3% and the Nasdaq Composite rose 2%.
Friday’s nonfarm payrolls report showed payrolls increased by 175,000 in April, lower than the 240,000 expected by economists surveyed by Dow Jones. The unemployment rate rose slightly to 3.9% from 3.8% the previous month, according to the Bureau of Labor Statistics. Wage data was also weaker than expected, a positive sign for inflation.
“It’s overall soft and overall positive for the market,” said Jamie Cox, managing partner at Harris Financial Group. “Weak wage growth should help allay concerns about a significant resurgence in inflation.”
Traders are pricing in a second interest rate cut before the end of the year after April’s weaker-than-expected job growth and slower-than-expected wage gains. That probability had fallen to less than 50% a day earlier, but rose to about 72% by Friday morning, according to FedWatch, CME Group’s futures market price tracker.
Interest rates also fell in response to the employment report, with the 10-year bond yield falling below 4.5%. At Wednesday’s Federal Reserve meeting, Chairman Jerome Powell said the central bank was prepared to act if the unemployment rate rose.
“We are prepared to respond to any unexpected downturn in the labor market,” Powell said.
Friday’s moves will cause all major stock averages to end the week higher. The Dow and Nasdaq each rose about 1.3%, while the S&P rose 0.6%.
Strong quarterly reports from major Dow companies contributed to Friday’s gains. apple It rose 6% after announcing a $110 billion share buyback and significant improvements in sales and bottom line profits.biotechnology amgen The company soared 12% after delivering better-than-expected earnings and providing a positive update on an experimental obesity drug.
