Wall Street increases as prospects for lesser rate increases are rekindled by the jobs report
(Reuters) On Friday, U.S. market indexes rose on hopes that August's slower wage growth would help to relieve some pricing pressures and persuade the Federal Reserve to take a more gradual approach to raising interest rates.
Afternoon trading saw gains across the board for all S&P 500 sectors, while rate-sensitive growth stocks underperformed as the Labor Department's data revealed that American employers employed more workers than anticipated in March.
The unemployment rate edged up to 3.7% from a pre-pandemic low of 3.5%, showing that the Fed's efforts to front-load rate hikes were starting to have an impact. However, average hourly earnings increased by 0.3% versus estimates of 0.4%.
According to Nicholas Anderson, portfolio manager at Thornburg Investment Management, "It's really the Goldilocks scenario for the economy and investors because it means that you see some relaxation in inflationary pressures and indicators of strong economy.
The Fed's goal of reducing inflation without harming the economy is often supported by slower wage growth, slower job growth, and increased labor force participation.
As the Fed considers raising interest rates to bring inflation, which is now running at a four-decade high, back to its 2% objective, wage growth data is considered as crucial.
The August consumer price report, which is due in mid-month and is the last significant data point before the Fed's policy meeting on September 20-21, will now be in the spotlight.
According to the CME Fedwatch tool, traders now estimate a 58% chance of a third consecutive 75 basis point rate hike, down from 70% before the jobs report.
The (jobs) figures will undoubtedly reduce the market's unfavorable attitude. However, there will be a lot of anxiety surrounding the Fed's decision "said Kristina Hooper, Invesco's senior global market strategist.
Because it helps them control inflation expectations, policymakers are likely to be fairly hawkish, which will continue to cause anxiety for the stock market.
Since Fed Chair Jerome Powell's hawkish comments last week about rate hikes, fears of aggressive policy tightening have seized Wall Street, with the S&P 500 falling roughly 4.5%. Other policymakers later shared his opinions.
The three major indices are all expected to lose money for a third consecutive week.
The S&P 500 was up 42.46 points, or 1.07%, at 4,009.31 at 12:10 p.m. ET, and the Nasdaq Composite was up 110.45 points, or 0.94%, at 11,895.57. The Dow Jones Industrial Average was up 313.92 points, or 0.99%, at 31,970.34 at that time.
As oil prices rose nearly 2% ahead of the OPEC+ meeting to discuss potential production cuts, energy equities rose 3%.
Banks increased by 2.2%, with shares of Bank of America rising by 2.7%.
Shares of the companies that bore the brunt of the recent selloff, including Apple Inc. (NASDAQ:AAPL), Microsoft Corp. (NASDAQ:MSFT), and Amazon.com (NASDAQ:AMZN), increased by 0.9% to 2%.
Wall Street's fear measure, the CBOE volatility index, dropped to a one-week low of 23.34 points.
Due to the Labor Day vacation, markets are closed on Monday.
On the NYSE and the Nasdaq, advancing issues exceeded declining ones by a ratio of 5.36 to 1 and 2.19 to 1, respectively.
The Nasdaq achieved 39 new highs and 95 new lows, while the S&P index registered three new 52-week highs and one new low.