NEW YORK (AP) – U.S. stocks rose Friday as a surprisingly positive report on the U.S. job market boosted economic optimism.
The S&P 500 rose 0.9%, nearing its all-time high set on Monday. The Dow Jones Industrial Average rose 341 points, or 0.8%, setting a record for itself, while the Nasdaq Composite Index rose 1.2%.
At the forefront are banks, airlines, cruise ship operators, and other businesses that stand to benefit most from a strengthened economy that puts people to work and pays bills. Norwegian Cruise Line rose 4.9%, JPMorgan Chase & Co. rose 3.5% and Russell 2000 index small companies rose 1.5%.
Concerns that the deteriorating situation in the Middle East could disrupt global oil flows helped stock indexes recover from losses earlier in the week. Oil prices rose again on Friday, but the move was more subdued than earlier in the week as the world continued to wait to see how Israel would respond to the Iranian missile attack.
Meanwhile, the strong US economy has regained the top spot in driving the market.
Bond yields soared in the bond market after the U.S. government said employers added 254,000 more jobs than they cut last month. This accelerated from August’s pace of 159,000 jobs and was faster than economists expected.
Lindsey Rozner, head of multisector investments at Goldman Sachs Asset Management, said it was a “grand slam” of reporting. He said Fed policymakers “must be smiling” as they try to accomplish the difficult feat of keeping the economy humming while controlling inflation.
Friday’s report caps a week of mostly positive economic indicators, with Wall Street wondering whether the job market can continue to sustain itself after the Fed earlier kept interest rates at 20-year highs. It helped ease one of the biggest doubts.
Until Friday’s jobs report, the overall trend had been slowing hiring by U.S. employers. This is not surprising given how hard the Fed has applied the brakes on the economy through interest rate hikes to quell high inflation.
But Friday’s explosive numbers strengthened hopes that the U.S. economy will continue to grow, especially now that the Federal Reserve has begun cutting interest rates to reinvigorate the economy. Last month, the Federal Reserve cut its key interest rate for the first time in four years and signaled further cuts to come through next year.
Friday’s jobs report was so strong that traders were forced to abandon bets that the Fed would cut rates further than usual at its next meeting. According to CME Group data, they currently forecast zero chance of a 0.5 percentage point rate cut. Just a week ago, they were saying it was better than the chance of flipping a coin.
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Scott Wren: “This report tells the Fed that a strong labor market and unstable housing and shelter data mean it won’t be easy to reduce inflation significantly in the short term.” This shows that we still need to be careful.” , Senior Global Market Strategist at Wells Fargo Investment Institute.
Aditya Bhave, an economist at Bank of America, expects the Fed to stop lowering its target once the federal funds rate reaches a range of 3% to 3.25%. That’s a quarter of a point higher than the bottom he had previously predicted. The federal funds rate currently ranges from 4.75% to 5%.
This decline in expectations for future rate cuts pushed the yield on the two-year note to 3.93% from 3.71% late Thursday. The yield on the 10-year bond rose to 3.97% from 3.85%.
Having to reconsider the ultimate impact of low interest rates will hurt stock prices for home builders, property owners and other companies that benefit from easing mortgage rates.
DR Horton, Pulte Group, and Lennar were the three biggest losers on the S&P 500, all falling at least 2.5%. Home Depot fell 0.8% and was the single biggest reason the Dow Jones Industrial Average lagged other indexes. During the day, the Dow rose 300 points at the beginning of the day, fell slightly, and then started to rise again.
Overall, the S&P 500 rose 51.13 points to 5,751.07. The Dow rose $341.16 to 42,352.75, and the Nasdaq rose $219.37 to 18,137.85.
Also on Friday, about 45,000 longshoremen at East Coast and Gulf ports agreed to a three-day strike halt until Jan. 15, with their unions giving time to negotiate new contracts. I reached that point and returned to work. This allayed concerns that a prolonged strike could push up inflation and hurt the economy.
In the oil market, the international standard Brent crude price rose 0.6% to $78.05 per barrel, taking the week’s increase to 9.1%. The price of benchmark U.S. crude oil per barrel rose 0.9% to $74.38, from about $68 at the beginning of the week.
Overseas, stock market indexes rose across much of Europe following strong employment data in the world’s largest economy.
In Asia, Hong Kong’s Hang Seng rose 2.8% in recent sharp gains. It soared more than 10% in the week on excitement over a flurry of recent announcements by the Chinese government to prop up the world’s second-largest economy.
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AP Business writers Yuri Kageyama and Matt Ott contributed.
