Stocks are sharply higher 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.
Quick Read
- Stock Market Surge: Wall Street experienced significant gains, with the S&P 500 up 1.4%, the Dow Jones Industrial Average increasing by 535 points (1.4%), and the Nasdaq composite climbing 2.2%.
- Jobs Report Influence: A government report indicated a modest job growth of 175,000 in April, a sharp decrease from March’s 315,000, hinting that high interest rates are beginning to impact the economy.
- Economic Interpretations: Economists suggest the slowdown in job growth could reduce inflation pressure, potentially allowing the Federal Reserve to consider rate cuts later in the year.
- Federal Reserve’s Stance: Fed Chair Jerome Powell recently noted that reducing inflation to target levels might take longer than expected, impacting interest rate policies.
- Market Reactions: Following the jobs report, Treasury yields dropped, with the 10-year Treasury yield falling to 4.50% and the two-year yield decreasing to 4.79%.
- Sector Performance: Technology stocks led the market rally, significantly influenced by Apple’s announcement of a $110 billion stock buyback and a major jump in its stock price despite a decline in iPhone sales.
- Individual Stock Movements: Apple’s stock rose nearly 7%, while Expedia Group’s shares dropped around 17% after adjusting its full-year bookings outlook.
- Global Market Effects: European markets also showed positive trends midday, with gains in major indexes like Germany’s DAX, Paris’s CAC 40, and London’s FTSE 100.
- Market Closures: Financial markets in Tokyo and mainland China were closed for holidays, affecting global trading dynamics.
The Associated Press has the story:
Wall Street surges after a key report shows pullback in hiring
Newslooks- NEW YORK- (AP)
Stocks are sharply higher 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 1.4% higher in morning trading and on track to erase its losses for the week. The Dow Jones Industrial Average gained 535 points, or 1.4%. The Nasdaq composite climbed 2.2%.
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.”
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.
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.
Treasury yields in the bond market mostly fell following the jobs report. The yield on the 10-year Treasury eased to 4.50% from 4.59% late Thursday. The two-year yield, which moves more closely with expectations for the Fed, fell to 4.79% from 4.88%.
The market’s gains were broad Friday, with technology stocks accounting for much of the rally. Apple jumped almost 7% after announcing a mammoth $110 billion stock buyback. The tech giant reported late Thursday that it posted its steepest quarterly decline in iPhone sales since the outset of the pandemic.
Expedia Group slumped about 17% after the online travel company 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 0.7%, 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.
