Dow surges more than 500 points on strong jobs report, debt deal

Stocks soared on Friday after a moderation in wage growth in May boosted bets that the Federal Reserve will skip raising interest rates this month, while investors cheered the country averting a catastrophic debt default.

The Dow Jones Industrial Average jumped 516 points, or 1.6%, to 33,578, the Nasdaq climbed 1% and the S&P 500 gained 1.3%.

The tech-heavy Nasdaq index touched its highest intraday level in over 13 months and headed for its sixth straight week of gains, its best streak since January 2020.

The Labor Department’s closely watched employment report showed unemployment rate at 3.7% in May against a forecast of 3.5%, while average hourly earnings were at 0.3%, down from 0.4% in April, highlighting a cooling in wage inflation.

Non-farm payrolls increased by 339,000 jobs vs. expectations of 190,000 additions.

“This is a reflection of a labor market that, while still robust, is softening gently, not rapidly. That’s exactly what the Fed would like to see,” said Art Hogan, chief market strategist at B Riley Wealth in New York.

The tech-heavy Nasdaq index touched its highest intraday level in more than a year.

“The Fed wants to tame inflation without crushing the jobs market, and this is another piece of evidence that they’re actually well along their way to getting that accomplished.”

The data brought relief to investors who now expect the Fed to skip an interest rate hike this month for the first time since starting its aggressive policy tightening more than a year ago.

Fed funds futures trading showed an over 70% probability that the Fed will hold interest rates steady at its June 13-14 policy meeting. 

Also lifting the mood, the Senate passed a bill late on Thursday to lift the government’s $31.4 trillion debt ceiling, avoiding a catastrophic, first-ever default.

Amazon gained 1.6% after a report that the company is in talks with telecom operators to offer low-cost mobile services in the US.

Telecom operators including Verizon Communications, T-Mobile US and AT&T fell between 3.7% and 8.5%, while Dish Network jumped 13.6%.