U.S. stocks advanced on Friday, with the S&P closing at a record high to cap off a strong week of gains for the major indexes, after data showed the U.S. economy unexpectedly shed jobs last month and dampened expectations the Federal Reserve would raise interest rates at its September meeting. The Labor Department said nonfarm payrolls decreased by 23,000 jobs last month, well below the estimate of economists polled by Reuters that called for an increase of 80,000 jobs.
Previously reported job gains for the prior two months were also revised sharply lower, while the unemployment rate fell to 4.1% last month from 4.2% in June due to workers leaving the labor force. Market expectations for a rate hike from the Fed at its next meeting dropped to about 44%, according to CME FedWatch, down from 55% in the prior session and 67% a week ago. Signs of progress for a potential peace deal in the Iran war have helped cool oil prices and, in turn, have eased inflation worries that could prompt a Fed rate hike and pushed Treasury yields lower.
A strong earnings season has also tempered concerns about the massive spending by AI-related companies, sending each of the three major indexes to their biggest weekly percentage gains since mid-April.
"You probably have to lower rates to kind of stimulate job growth, but if you lower rates, you're going to also stimulate inflation. So you're kind of in a pickle at this point, and yet the market's just taken off because earnings have been stellar," said Tom Siomades, chief market economist at AE Wealth Management in Topeka, Kansas.
"The market should be reacting to weak job numbers and higher inflation and the possibility of a slow-growth economy that may need to have rates raised rather than cut, and yet it's not. We're setting records, so go figure."
With earnings season entering the final stretch, of the 436 companies in the S&P 500 that have already reported results through Friday morning, 85.1% have topped analyst expectations, according to LSEG data - well above the 68% average since 1994.
Under new Fed Chair Kevin Warsh, the U.S. central bank has offered investors little forward guidance on monetary policy, leading market participants to focus on economic data and commentary from policymakers.
MAJOR INDEXES POST GAINS
According to preliminary data, the S&P 500 gained 46.48 points, or 0.60%, to end at 7,756.44 points, while the Nasdaq Composite gained 338.81 points, or 1.29%, to 26,690.62. The Dow Jones Industrial Average rose 151.33 points, or 0.28%, to 54,036.43. Elon Musk's SpaceX surged a day after the expiry of the first of several share lockup restrictions following its record public offering in June. Collaboration software maker Atlassian shot up while chip company Microchip Tech jumped after both forecast quarterly revenue above estimates. Among other movers, vacation rental company Airbnb rose as the best performer on the S&P 500 after beating second-quarter revenue estimates. In contrast, Trade Desk plummeted as the worst performer on the benchmark index after the ad-tech firm forecast third-quarter revenue below expectations.
