Wall Street made solid gains on Friday, after the latest nonfarm payrolls report signaled cooling inflation and a U.S. economy that was powering ahead of others.
The advance came despite the data also underscoring the Federal Reserve’s wait-and-see approach to cutting interest rates. Fed speakers reacted with caution to the jobs print.
The Nasdaq Composite (COMP:IND) gained 1.62% to 16,308.45 points in afternoon trade. A rise in megacap stocks provided a boost to the tech-heavy index, with Netflix (NFLX) climbing nearly 3% after Pivotal Research upped its price target on the streaming giant’s stock to a Street high.
The benchmark S&P 500 (SP500) advanced 1.32% to 5,215.41 points, while the blue-chip Dow (DJI) was up 0.92% to 38,952.70 points.
All 11 S&P sectors were in the green.
Before the opening bell, the U.S. Bureau of Labor Statistics reported 303K nonfarm payrolls in March, well above the anticipated rise of 212K and accelerating from the +270K reading in February. Meanwhile, the unemployment rate ticked down to 3.8% from 3.9%, while the labor force participation rate inched up to 62.7% from 62.5%.
The numbers continued to point to a labor market that has shown remarkable resilience to the Fed’s aggressive monetary policy tightening cycle. The figures also mean that the Fed will likely not be in any rush to cut interest rates.
But traders appeared to focus on a key part of the report: average hourly earnings (AHE), which is an indicator of inflation. On a M/M basis, AHE gained 0.3% in March, matching the consensus, while on a Y/Y basis, AHE rose by 4.1%. That its lowest level since June of 2021.
“On a year-over-year basis, wage growth slipped to nearly a three-year low of 4.1% in a sign inflationary pressures from the jobs market continue to gradually subside. With fewer workers quitting their jobs and businesses reporting that they are having an easier time filling positions, we expect wage growth to slow a bit further in the months ahead, although wage gains do not need to ease much further to allay concerns over inflation,” Wells Fargo’s Sarah House said.
Even cautionary reactions from Federal Reserve speakers to the jobs print did not deter sentiment on Friday. Richmond Fed President Tom Barkin called the report “quite strong” and noted that inflation was coming down but that it had been an “unbalanced mix.” Moreover, Dallas Fed President Lorie Logan went one step further and said that it might be too soon to consider cutting interest rates.
“The strong March gain in payrolls and low and stable unemployment are evidence that the economy remains rock solid. Most encouraging is that despite the job gains, labor supply is keeping pace, thanks to robust immigration. The tight labor market and wage growth continue to ease,” Mark Zandi, chief economist at Moody’s Analytics, said on X (formerly Twitter).
“Indeed, wage growth is already consistent with current productivity growth and the Fed’s inflation target. The Fed should be cutting rates. But OK, policymakers want proof positive that inflation is headed to target. They should get that in the next month, two or three,” Zandi added.
Treasury yields rose after the nonfarm payrolls report, as market participants sold off bonds. The longer-end 30-year yield (US30Y) was up 5 basis points to 4.52%, while the 10-year yield (US10Y) was up 6 basis points to 4.37%. The shorter-end more rate-sensitive 2-year yield (US2Y) was up 6 basis points to 4.72%.
“The bond market is going to have a tough time digesting this print. Yields backed up substantially before the report on multiple concerns. But there may be an additional shock to come if the market concludes the economy is unstoppable,” Dan Alpert, managing partner at Westwood Capital, said on X.
See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.
Turning to active stocks, Shockwave Medical (SWAV) rose after Johnson & Johnson (JNJ) agreed to buy the medical device maker in a deal with an enterprise value of about $13.1B.