Wall Street has surged to a higher close as a softer than expected employment report bolstered the case for rate cuts from the Federal Reserve while also providing evidence of US economic resilience.
All three major US stock indices posted robust gains.
The tech-heavy Nasdaq led the pack, rising 2.0 per cent with an assist from Apple shares following the iPhone maker’s record share buyback announcement.
All three indexes notched their second straight Friday-to-Friday gains, capping a week in which markets were encouraged by Fed chair Jerome Powell’s more dovish than expected statements following Wednesday’s rate decision.
The Labor Department’s employment report showed the US economy added fewer jobs than expected while the unemployment rate ticked higher and wage growth unexpectedly cooled.
The report likely hit the sweet spot for the Fed, offering signs the labour market is softening, which Powell has deemed necessary to put inflation on a sustainable downward path.
The report also provided assurances on US economic health.
The report prompted investors to raise bets the Fed would implement its first rate reduction in September.
“The investor narrative remains the Fed and interest rates and today’s weak jobs report puts rate cuts firmly on the Fed’s 2024 agenda,” said Greg Bassuk, CEO at AXS Investments in New York.
“And while ‘higher for longer’ remains the roadmap, this economic data is being warmly embraced by investors, Wall Street and Main Street, across all sectors”
Fed officials weighed in on the data.
Fed governor Michelle Bowman reiterated her willingness to hike rates if inflation progress reverses, and Chicago Fed President Austan Goolsbee said the employment report boosted confidence the economy is not overheating.
“Let’s remember, it’s early May; we shouldn’t pretend that the year’s over or somehow every card has been played,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York.
“But I don’t think for a second that any Fed official really believes that a rate hike is appropriate given current conditions and data.”
First-quarter earnings season is approaching the final stretch, with 397 of the companies in the S&P 500 having reported as of Friday morning.
Of those, 77 per cent have posted consensus-beating results, according to LSEG data.
Apple surged 6.0 per cent after the company unveiled a record $US110 billion ($A166 billion) share buyback program and beat quarterly expectations.
Shares of biotech firm Amgen jumped 11.8 per cent after encouraging interim data on its experimental weight-loss drug MariTide and first-quarter earnings.
Travel platform Expedia cut its full-year revenue growth forecast, sending its shares sliding 15.3 per cent.
The Dow Jones Industrial Average rose 450.02 points, or 1.18 per cent, to 38,675.68, the S&P 500 gained 63.59 points, or 1.26 per cent, to 5,127.79 and the Nasdaq Composite added 315.37 points, or 1.99 per cent, to 16,156.33.
Of the 11 major sectors in the S&P 500, all but energy ended the session in positive territory, with technology claiming the largest percentage gain at 3.0 per cent.
Advancing issues outnumbered declining ones on the NYSE by a 3.62-to-1 ratio; on Nasdaq, a 2.00-to-1 ratio favoured advancers.
The S&P 500 posted 21 new 52-week highs and one new low; the Nasdaq Composite recorded 95 new highs and 65 new lows.
Volume on US exchanges was 10.72 billion shares compared with the 11.07 billion average for the full session over the last 20 trading days.