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 465 points, or 1.2%. The S&P 500 surged 1.3% while the Nasdaq Composite rallied 2%.
With Friday’s moves, all the major averages are on pace to cap off a winning week. The Dow and Nasdaq have added 1.1% and 1.4%, respectively, while the S&P is up 0.5%.
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. The probability of a cut in September hovered near 50%, according to the CME Group’s FedWatch tracker of futures market pricing.
Rates also dropped following the labor report, with the 10-year yield falling below 4.5%. The movement benefited rate-sensitive megacap technology stocks, with Nvidia and Advanced Micro Devices last up about 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 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 headed for their best day since 2009.
