NEW YORK (AP) – U.S. stocks are rising Friday as a surprisingly strong report on the U.S. job market boosts economic optimism.
The S&P 500 rose 0.6% in late trading, nearing its all-time high set on Monday. With less than an hour left in trading, the Dow Jones Industrial Average was up 223 points, or 0.5%, and the Nasdaq Composite Index was up 0.9%.
Leading the way are banks, cruise ship operators, and other businesses that stand to benefit most from a stronger economy that puts people to work and more solvent. Norwegian Cruise Line rose 3.8%, JPMorgan Chase & Co. rose 3.3% and Russell 2000 index small companies rose 1.3%.
Stock indexes were able to recover some of their losses earlier in the week on concerns that tensions in the Middle East could disrupt global oil flows. Oil prices rose again on Friday, but the move was more subdued than earlier in the week as the world remained focused on how Israel would respond to the Iranian missile attack from Tuesday.
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 data on the job market, with the job market expected to continue holding strong after the Federal Reserve kept interest rates at a 20-year high. It helped allay one of Wall Street’s biggest questions: whether it can do so.
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 avoid recession, especially now that the Federal Reserve has begun cutting interest rates to shore up 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.
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Friday’s very strong jobs report prompted traders to abandon bets that the Federal Reserve 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 said they had a better chance than a coin toss.
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.
Bank of America economist Aditya Bhave expects the Fed to stop lowering its target if the federal funds rate reaches the 3-3.25% range. said. 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 3.92% from 3.71% late Thursday. The yield on the 10-year bond rose to 3.98% from 3.85%.
Having to reconsider how much interest rates will ultimately be cut will also hurt the stock prices of home builders, property owners and other companies that thrive when mortgage rates are easy.
DR Horton, Pulte Group and Lennar were the three biggest losers on the S&P 500, all falling at least 2.7%. Home Depot fell 1.3%, making it the single biggest reason the Dow Jones Industrial Average lagged other indexes.
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% this 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.
