Wall St gains after soft jobs data allays rate jitters

Wall Street’s main indexes advanced on Friday after a softer-than-expected jobs report revived hopes of the Federal Reserve cutting interest rates this year, while gains in Apple and Amgen on upbeat corporate updates added support.

U.S. job growth slowed more than expected in April and the increase in annual wages fell below 4% for the first time in nearly three years, while the unemployment rate stood at 3.9% compared with expectations that it would remain steady at 3.8%.

“The data is soft across the board from the Fed’s perspective, which is what really matters and an unemployment rate of 3.9% is not something disastrous,” said Jason Pride, chief of investment strategy and research at Glenmede.

“This indicates an economy that is not declining dramatically, but it definitely indicates a looser labor market.”

Traders added to bets that the Fed will deliver its first interest rate cut this year in September.

Yields across government bonds fell after the data, with the yield on the 10-year note last at 4.5036%.

The CBOE Volatility index, also known as Wall Street’s “fear gauge”, touched its lowest level in a month.

Wall Street gains on Fed’s dovish signals

The latest economic data follows the Fed’s more dovish-than-expected interest rate guidance in its latest policy meeting, which caused U.S. stocks to rally on Thursday.

Separately on Friday, the U.S. services sector contracted in March, while a measure of prices paid by businesses for inputs jumped, a worrisome sign for the outlook on inflation.

Apple jumped 6%, outpacing other megacap stocks after the iPhone maker unveiled a record $110 billion share buyback program and beat modest expectations for quarterly results and forecast.

Amgen climbed 12.1% as the biotechnology firm said it was very encouraged after completing an interim analysis of its mid-stage study of experimental weight-loss drug MariTide and as it reported first-quarter earnings.

At 10:02 a.m. ET, the Dow Jones Industrial Average rose 481.28 points, or 1.26%, to 38,706.94, the S&P 500 gained 58.48 points, or 1.15%, to 5,122.30, and the Nasdaq Composite gained 303.94 points, or 1.92%, to 16,144.89.

Nine of the 11 major S&P 500 sectors were trading higher, with information technology and real estate stocks among the top gainers.

Block rose 5.4% after the Jack Dorsey-led payments fintech firm lifted its full-year adjusted core earnings forecast and revealed plans to add more bitcoins to its balance sheet.

Expedia fell 13% after the online travel agency cut its full-year revenue growth forecast as gross bookings were hit by a drag in its vacation rental platform.

Of the 397 companies in the S&P 500 that have reported earnings to date in the first quarter, 76.8% beat analysts’ expectations, compared with the historical average of 67%, according to LSEG data.

Advancing issues outnumbered decliners for a 5.7-to-1 ratio on the NYSE and a 3.52-to-1 ratio on the Nasdaq.

The S&P 500 posted 17 new 52-week highs and one new low, while the Nasdaq recorded 86 new highs and 24 new lows.

While Fed Chair Jerome Powell indicated that stubbornly high inflation would see a long-expected U.S. rate cut pushed back, he refused to entertain talk that rates might actually need to go up again.

Money markets see a 58% chance of the first rate cut of at least 25 basis points (bps) being delivered in September, but have priced in a greater 68.4% chance of a cut in November, according to CME FedWatch tool.

“The outcome of the (Fed) statement, plus the press conference was for slightly more rate cuts to be priced in, not necessarily sooner, but by the end of the year,” said Brian Nick, senior investment strategist at the Macro Institute.

On Wednesday, U.S. stocks initially rose, but the S&P 500 and the Nasdaq closed lower for the day after the Fed decision.

Meanwhile, the number of Americans filing new claims for unemployment benefits held steady at a low level last week, pointing to a still fairly tight labor market.