Stocks are rising on Wall Street Friday following a government report showing job growth rose modestly in April, a sign that persistently high interest rates may be starting to take a bigger toll on the world’s largest economy.
The S&P 500 was 0.9% higher in morning trading and on track to erase its losses for the week. The Dow Jones Industrial Average gained 329 points, or 0.9%, as of 10:40 a.m. Eastern. The Nasdaq composite added 1.8%.
The nation’s employers added 175,000 jobs last month, down sharply from the blockbuster increase of 315,000 in March. It was also well below the 233,000 gain that economists had predicted. April’s average hourly earnings also rose less than expected. The report suggests that the Federal Reserve’s aggressive streak of rate hikes may finally be cooling the pace of hiring.
“The demand for labor is slowing, which will eventually ease inflation pressures, giving the Fed some leeway to cut rates later this year,” said Jeffrey Roach, chief economist for LPL Financial. “Slower payroll growth and fewer hours worked imply the economy is slowing at a measured pace. This jobs report is consistent with the soft landing narrative.”
Treasury yields in the bond market mostly fell following the jobs report. The yield on the 10-year Treasury eased to 4.53% from 4.59% late Thursday. The two-year yield, which moves more closely with expectations for the Fed, fell to 4.82% from 4.88%.
The U.S. economy is in a tight spot, where the hope is that it remains strong enough to stay out of a recession but not so strong that it worsens the already stalled progress on inflation.
Stubbornly high readings on inflation this year pushed Federal Reserve Chair Jerome Powell to say on Wednesday that it will likely take “longer than previously expected” to get enough confidence about inflation to cut interest rates.
The Fed’s main interest rate has been sitting at its highest level since 2001, and cuts would release some pressure on the economy and financial markets.
The benchmark S&P 500 fell 4.2% in April, its first monthly loss since October, as signals of stubbornly high inflation forced traders to ratchet back expectations for when the Fed could begin easing interest rates.
After coming into the year forecasting six or more cuts to rates in 2024, traders are now largely betting on just one or two, if any, according to data from CME Group.
Technology stocks accounted for much of the rally Friday. Apple jumped almost 7% after announcing a mammoth $110 billion stock buyback. The tech giant reported late Thursday its steepest quarterly decline in iPhone sales since the outset of the pandemic.
Microsoft rose 1.9% and Nvidia added 2.7%.
Several companies rose after reporting quarterly results that topped Wall Street’s estimates, including Amgen, which climbed 12.1% and Live Nation Entertainment, which added 8.3%.
Booking Holdings rose 5.6% after reporting better-than-expected first-quarter bookings and revenue. Another online travel company, Expedia Group, didn’t fare as well. Its shares slumped 13.4% after the company’s latest quarterly results beat Wall Street targets but lowered its full-year bookings guidance because its Vrbo rental unit has been slow to recover from its migration to Expedia’s platform.
In Europe at midday, Germany’s DAX gained 0.4%, while the CAC 40 in Paris rose 0.4% and London’s FTSE 100 added 0.5%.
Markets in Tokyo and mainland China were closed for holidays. The Japanese yen strengthened slightly against the dollar.