Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S.
Brendan Mcdermid | Reuters
Stocks jumped sharply Friday after a softer-than-expected April jobs report boosted hopes that the Federal Reserve could start cutting interest rates soon.
The Dow Jones Industrial Average gained 410 points, or 1.1%. The S&P 500 surged 1%, while the Nasdaq Composite rallied 1.7%.
Friday’s nonfarm payrolls report showed 175,000 jobs gained in April, below the 240,000 jobs expected by economists surveyed by Dow Jones. The unemployment rate edged up to 3.9%, versus 3.8% in the prior month, according to the Bureau of Labor Statistics. Wage figures also came in less than expected — an encouraging sign for inflation.
“It’s soft across the board, which is overall positive for markets,” said Jamie Cox, managing partner at Harris Financial Group. “Wage growth being soft is going to help take the concerns about a massive resurgence of inflation off the table.”
Following April’s weaker-than-expected job growth and moderating wage gains, traders are pricing in a second rate cut by the end of the year. The probability rose to about 72% Friday morning after falling to less than 50% the day before, according to the CME Group’s FedWatch tracker of futures market pricing.
Rates also dropped following the labor report, with the 10-year yield falling below 4.5%. During Federal Reserve’s meeting on Wednesday, Chair Jerome Powell said the central bank was prepared to act if the unemployment rate ticked higher.
“We’re also prepared to respond to an unexpected weakening in the labor market,” Powell said.
With Friday’s moves all the major averages are headed to finish the week with gains. The Dow and Nasdaq have added about 1.3% each, while the S&P is up 0.6%.
Strong quarterly reports from major Dow components contributed to Friday’s rally. Apple advanced 6% after it announced a $110 billion share repurchase and a top -and bottom-line beat. Biotech Amgen surged 12% after posting better-than-expected earnings and offering a positive update on an experimental obesity drug. Shares headed for their best day since 2009.
