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The Dow jumped 400 points on Friday after a blockbuster May jobs report offered more evidence that the U.S. labor market is in surprisingly strong shape despite the Federal Reserve’s interest-rate hikes over the past year.
How are stocks trading?
- The S&P 500 gained 36 points, or 0.8%, at 4,257.
- The Dow Jones Industrial Average rose by 411 points, or 1.2%, to 33,478.
- The Nasdaq Composite gained 71 points, or 0.5%, to 13,170.
On Thursday, the S&P 500 advanced by 41.19 points, or 1%, to close at 4,221.02, the highest settlement since Aug. 19, according to Dow Jones Market Data, as stocks kicked off the month of June in the green.
What’s driving markets?
Data showed the U.S. economy added 339,000 jobs last month, far surpassing expectations for 190,000 new jobs from economists polled by the Wall Street Journal. What’s more, the Department of Labor revised March and April gains higher by roughly 93,000. The jobs data beat Wall Street expectations by the widest margin since data for January were released on Feb. 3.
However, average hourly earnings rose 0.3%, roughly in line with expectations, and the unemployment rate rose to 3.7%. The wage-growth number helped to assuage investors’ fears that wage growth would continue to contribute to sticky inflation, market analysts said.
See: Jobs report shows big 339,000 gain in May. U.S. economy still going strong
Investors cheered the report because it suggested that expectations for an imminent recession appear overblown, which helped to boost stocks even as it boosted expectations for more Federal Reserve interest rate hikes.
“The report today continues to point to a soft landing for the economy and should keep market expectations for a July hike in play,” said Ellen Zentner, chief U.S. economist at Morgan Stanley. “We do not believe today’s report was strong enough to meet the bar for the Fed to hike in June, but raises the risk that the Fed could hike in July.”
The probability of a Federal Reserve interest rate hike in June rose to 36% after the jobs report, up from 20.4% earlier, according to the CME’s FedWatch tool.
“The labor market continues to churn out impressive numbers here. This probably puts more pressure on the Fed to consider a July rate hike,” said Paul Eitelman, chief investment strategist for North America at Russell Investments, which has roughly $276.5 billion under management, during a phone interview with MarketWatch.
Senior Fed officials said earlier this week that they would prefer to keep rates on hold when the Fed’s upcoming meeting ends on June 14, but they signaled openness to raising rates further later in the year. The Fed raised its policy rate by roughly 5 percentage points in 2022 and early 2023, the fastest pace since the 1980s.
Wall Street also cheered a U.S. Senate vote to raise the federal debt ceiling late Thursday which averted a government default. The bill is now on its way to President Joe Biden’s desk to be signed into law.
See: Senate passes debt-ceiling bill in 63-36 vote, sending it to Biden to get signed into law
Elsewhere, Asian markets rallied on news of the U.S. debt-ceiling deal agreement, with the Hong Kong Hang Seng up nearly 4%, after skirting bear-market territory earlier this week, following sluggish China economic data.
The yield on the 10-year Treasury note edged up by 2 basis points to 3.636%, while the dollar was steady. European stocks also traded higher.