Stocks increased on Wall Street Friday, with a decline in Treasury yields, following a report indicating an unexpected reduction of 23,000 jobs last month. Key indexes recorded gains for the second consecutive week, setting several new records. This development signals a robust start to August after a few weaker months.
The S&P 500 climbed by 47.68 points, or 0.6%, reaching 7,757.64, surpassing its previous all-time high set on Tuesday. The benchmark index has maintained a record streak throughout the year. The Dow Jones Industrial Average grew by 151.83 points, or 0.3%, to 54,036.93, nearing its record from Wednesday. Meanwhile, the Nasdaq composite rose by 342.26 points, or 1.3%, to 26,690.62.
Technology stocks played a crucial role in driving the broader market upward, given their substantial market values. Companies like Nvidia and Broadcom saw increases of 2.3% and 1.7% respectively. The bond market showed a more pronounced reaction to the jobs data, interpreted as a potential delay in interest rate hikes by the Federal Reserve to combat inflation. The yield on the 10-year Treasury fell from 4.67% to 4.64%, with temporary dips to 4.60%.
The surprising job cut hints at deferred interest rate hikes.
The two-year Treasury yield, which aligns more closely with expectations for Fed rate changes, declined from 4.22% to 4.20%, with brief drops to 4.15%. “Although the stock market might welcome the dovish implications of the report, future growth potential in an economy with fewer jobs raises concerns,” commented Peter Graf, chief investment officer at Amova Asset Management Americas, in his research note.
The recent data offers a less optimistic view of the jobs market, which had been a positive aspect of the economy despite rising inflation and household spending worries. Revisions for June and May reflected a reduction of 103,000 jobs. The focus now shifts to the Fed’s next move. Interest rates have remained steady amid inflation concerns, partly fueled by oil price hikes due to the U.S. conflict with Iran.
Wall Street anticipates at least one rate hike by year-end, with shifting forecasts for upcoming meetings. The probability of a rate increase in September has decreased from 55% to 42%, as recorded by CME FedWatch.
A weaker jobs market could complicate the Fed’s balancing act of supporting job growth while combating inflation. Higher interest rates might slow economic growth, pressuring the already fragile jobs market. Businesses and Wall Street typically favor lower interest rates, as they encourage investments, though they can also exacerbate inflation.
Significant inflation reports are expected next week, with the consumer price index (CPI) being the most critical. Wall Street projects a 3.4% inflation rate for July, representing a slight dip from June’s 3.5%. Inflation has consistently exceeded 3% for much of the year.
“Today’s weak payroll data might relieve some pressure on the Fed to raise rates in September, but next week’s inflation figures will likely determine the outcome,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management, in her research note.
This jobs report wrapped up a week largely focused on corporate earnings and the ongoing U.S. conflict with Iran. Second-quarter corporate earnings are on track for the strongest growth since 2021, with nearly 90% of S&P 500 companies having reported, showing a 50% expected profit growth overall. This buoyant earnings performance has helped ease some of Wall Street’s concerns over whether the substantial stock gains predicted for 2026 are sustainable.
Earnings reports were minimal as the latest reporting round concluded. Airbnb saw a surge of 17.4% following a report revealing better-than-expected profit and revenue in the last quarter.
Oil prices continued their upward trend, with Brent crude, the global benchmark, rising by 1.3% to $83.55 a barrel. The U.S. conflict with Iran, now five months ongoing, previously drove oil prices as high as $113 per barrel, affecting gasoline and shipping costs extensively. Both nations have expressed intentions to negotiate deals to reopen the Strait of Hormuz, historically a crucial passage for one-fifth of the world’s oil and natural gas.
Associated Press Business Writer Elaine Kurtenbach contributed to this report.