Shares hit record highs on Wall Street on Friday despite an incredibly disappointing report in the country’s labor market as investors see it helping to keep interest rates low.
The S&P 500 rose 0.7% in afternoon trading and sits just above the 4,231 level. If it stays there, it would break its all-time high of 4,211.47 set in the afternoon. end of last month. The Dow Jones Industrial Average was up 222 points, or 0.6%, at 34,772 at 2:34 p.m. EST, and the Nasdaq composite was 0.8% higher.
Voices from top to bottom on Wall Street acknowledged that Friday morning’s jobs report was a huge disappointment. This is usually the most anticipated economic data in the market each month, and it shows that employers added just 266,000 jobs in April. This was far less than the 975,000 jobs expected by economists and a marked slowdown from the hiring rate of 770,000 in March.
“It was a bit of a shock when that number hit the headlines, but you realize that most, if not all, is not necessarily the result of demand, but of supply,” said Peter. Essele, Head of Portfolio Management for Commonwealth Financial Network. “There seems to be a bit of a labor shortage right now.”
The weak report rocked the bond market and initially drove yields down. The 10-year Treasury yield briefly fell below 1.49% to its lowest level in two months before recovering. It edged up in afternoon trading to 1.57% from 1.56% Thursday night.
Many analysts have said they don’t want to put too much emphasis on a single month of daunting data. They still expect the economy to strengthen significantly as coronavirus vaccinations roll out. The low number of jobs also strengthens the case for the Federal Reserve to keep interest rates low in the hope of stimulating the job market.
Low rates have been a major reason for the stock market to skyrocket to record highs since its pandemic low in March 2020. One of the biggest fears in the market in recent months is that an overfed economy could lead to inflation. higher and lasting and force the Federal Reserve to back down on its measures. The central bank keeps short-term rates at an all-time high and buys $ 120 billion in bonds every month.
After Friday morning’s jobs report, investors lowered their bets that the Federal Reserve will soon hike rates. Now they see just a 7% chance of a federal funds rate hike by the end of the year, down from the 15% chance they saw a month ago, according to CME Group.
The stocks that benefited the most from low rates, including high growth tech companies, helped dominate the market on Friday. Microsoft rose 1.1% and Nvidia jumped 1.6%, with the tech sector alone accounting for more than 20% of the S&P 500’s afternoon gain.
Strong earnings reports have also helped drive the market as companies continue to generate successful growth in the first three months of the year.
Expedia rose 6.1% after reporting a loss for the first quarter that was not as bad as Wall Street expected, and its earnings were better than expected.
While the sharp slowdown in hiring could calm inflation fears, a measure from the jobs report also showed wages rose more than economists expected last month.
In European stock markets, France’s CAC 40 rose 0.5%, while Germany’s DAX rose 1.3%. London’s FTSE 100 gained 0.8%.
In Asia, Shanghai stocks fell 0.7% and Hong Kong’s Hang Seng fell 0.1%.
China said its trade with the United States and the rest of the world jumped double-digit in April as consumer demand picked up, but growth appeared to be slowing.
Japan’s benchmark Nikkei 225 recouped its early losses to climb nearly 0.1%, while Korea’s Kospi gained 0.6%.
Japan has decided to extend its state of emergency to curb the spread of COVID-19 infections, which started last month in some urban areas, with people urged to stay home and restaurants closed early. The emergency will continue until the end of the month, instead of ending on May 11, officials said.
Concerns are growing that Japan’s medical system is under strain, straining its ability to deploy vaccines and treat a growing number of infections. About 2% of the 126 million people in Japan have been vaccinated so far. Opposition is growing against the Tokyo Olympics, which are slated to open in July, with growing doubts whether the government can deliver on its promise to get older people vaccinated by then.
Yuri Kageyama, AP business writer, contributed.
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