U.S. Stocks Advance As Treasury Yields Drop Following Jobs Data

Stocks moved mostly higher over the course of the trading day on Friday, with the major averages all moving to the upside after turning in a mixed performance early in the session. The Nasdaq and the S&P 500 closed higher for the fourth straight session, once again reaching new record closing highs.

The major averages reached new highs for the session going into the close of trading. The Nasdaq jumped 164.46 points or 0.9 percent to 18,352.76, the S&P 500 climbed 30.17 points or 0.5 percent to 5,567.19 and the Dow rose 67.87 points or 0.2 percent to 39,375.87.

For the holiday-interrupted week, the Nasdaq spiked by 3.5 percent, the S&P 500 surged by 2.0 percent and the Dow advanced by 0.7 percent.

The strength on Wall Street came as the Labor Department’s closely watched monthly employment report for June generated optimism about the outlook for interest rates.

While employment jumped by more than expected in June, the report also showed downward revisions to job growth in April and May as well as another unexpected uptick by the unemployment rate.

The Labor Department said non-farm payroll employment shot up by 206,000 jobs in June compared to economist estimates for an increase of about 190,000 jobs.

However, the report also showed the increases in employment in April and May were downwardly revised to 108,000 jobs and 218,000 jobs, respectively, reflecting a net downward revision of 111,000 jobs.

The unemployment rate also rose for the third straight month, inching up to 4.1 percent in June from 4.0 percent in May. Economists had expected the unemployment rate to remain unchanged.

With the unexpected uptick, the unemployment rate reached its highest level since hitting a matching rate in November 2021.

Treasury yields moved lower following the release of the report amid optimism the continued increase by the unemployment rate will convince the Federal Reserve to lower interest rates in the near future.

“On net, the job market looks considerably cooler in the June report than in May, and the unemployment rate at 4.1% is above where the median Fed policymaker projected it at year-end when they compiled economic projections last month,” said Bill Adams, Chief Economist for Comerica Bank.

“From the Fed’s perspective, the labor market isn’t soft enough justify an interest rate cut at this month’s meeting,” he added. “But the labor market’s cooling trend is quite clear. If inflation holds in its recent range, the Fed is likely to make an initial rate cut at the following decision, in September.”

Nonetheless, overall trading activity was somewhat subdued on the day, as some traders remained away from their desks following the Independence Day holiday on Thursday.

Sector News

Gold stocks moved sharply higher over the course of the session, resulting in a 2.6 percent surge by the NYSE Arca Gold Bugs Index. The strength among gold stocks came as the price of the precious metal climbed to its highest levels in a month.

Significant strength also emerged among software stocks, as reflected by the 1.4 percent gain posted by the Dow Jones U.S. Software Index.

Pharmaceutical and retail stocks also showed notable moves to the upside, with the NYSE Arca Pharmaceutical Index and the Dow Jones U.S. Retail Index climbing by 1.3 percent and 1.1 percent, respectively.

On the other hand, airline stocks showed a substantial move to the downside, dragging the NYSE Arca Airline Index down by 2.5 percent.

A decrease by the price of crude oil also weighed on energy stocks, while banking and steel stocks also saw notable weakness on the day.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Friday. Japan’s Nikkei 225 Index closed just below the unchanged line, while China’s Shanghai Composite Index fell by 0.3 percent and Hong Kong’s Hang Seng Index tumbled by 1.3 percent.

Meanwhile, the major European markets finished the day mixed. While the German DAX Index inched up by 0.1 percent, the French CAC 40 Index dipped by 0.3 percent and the U.K.’s FTSE 100 Index slid by 0.5 percent.

In the bond market, treasuries moved notably higher in reaction to the monthly jobs report. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 8.3 basis points to 4.272 percent.

Looking Ahead

Inflation data returns to the spotlight next week, with the Labor Department due to release its reports on consumer and producer prices in June. Traders are also likely to keep an eye on congressional testimony by Fed Chair Jerome Powell.

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