The S&P 500 closed at a record high Friday, rising 0.6% to cap its best week since April, after a surprise drop in July payrolls eased pressure on the Federal Reserve to raise rates. The Nasdaq Composite led the day's gains with a 1.3% advance, and traders now expect the central bank to hold its benchmark rate steady in September.
The S&P 500 closed at a record high Friday, rising 0.6% to cap its best week since April. The Nasdaq Composite climbed 1.3%. The Dow Jones Industrial Average added 151 points, or 0.3%.
Friday's gains extended a second straight week of gains for stocks. The S&P 500 has risen more than 3% week to date, building on a close above 7,700 earlier this week. The Nasdaq has gained 5% this week, and the Dow has added around 3%, with all three indexes notching their best weekly performance since April.
Weak jobs report cools rate-hike bets
The rally followed a surprisingly weak jobs report. July nonfarm payrolls fell by 23,000. That was well short of the gain of 83,000 that economists polled by Dow Jones had forecast. The unemployment rate fell to 4.1%, though economists had expected it to hold at 4.2%. The labor force participation rate also dropped to its lowest level in more than five years.
Traders read the miss as lowering the odds of a near-term rate hike. A majority of fed funds futures traders now expect the central bank to hold its benchmark rate at 3.50% to 3.75% at the September meeting, according to the CME FedWatch tool. That is down from a 55% chance of a quarter-point increase priced in just a day earlier.
Goldman Sachs chief economist Jan Hatzius said the report reads weaker once revisions are factored in: "If you take the whole report together, it's weaker." He added that next week's inflation data will carry more weight than the jobs report for the Fed's September decision.
Chip and software earnings power the rebound
Chip stocks fueled much of the Nasdaq's advance this week, with the iShares Semiconductor ETF up about 7%. Software earnings added to the rally Friday. Cloudflare rose 4% after issuing a solid full-year and current-quarter outlook. Atlassian jumped 36% after its fourth-quarter earnings and revenue topped estimates.
Source: US Top News and Analysis
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