Domestic employers added 175,000 jobs last month, down from March’s massive gain of 315,000, according to the Labor Department. The latest payroll numbers were well below the 233,000 increase expected by economists. On the other hand, average hourly wages, a major factor in inflation, grew less than expected.
A modest increase in payrolls last month suggests the Federal Reserve’s aggressive streak of rate hikes may finally be starting to take a toll on the world’s largest economy. This will help reassure the Fed that inflation will ease further, potentially moving the central bank closer to cutting rates.
“Slowing labor demand will ultimately ease inflationary pressures and give the Fed room to cut rates this year,” said Jeffrey Roach, chief economist at LPL Financial. “Slower employment growth and fewer hours worked suggest the economy is slowing at a steady pace. This jobs report is consistent with a soft landing story.”
U.S. bond yields in the bond market generally fell in response to the employment report. The yield on the 10-year U.S. Treasury, which financial institutions use as a guide to pricing mortgages, fell to 4.5% from 4.59% late Thursday. The yield on the two-year Treasury note, which is moving more in line with the Fed’s expectations, fell to 4.81% from 4.88%.
The U.S. economy is in trouble and is expected to remain strong enough not to fall into recession, but not strong enough to worsen already stagnant inflation. . This is essentially the “soft landing” the Fed wants to achieve to bring inflation down to its 2% target. Consumer-level inflation was 3.5% in March, well below the peak of 9.1% nearly two years ago.
With inflation readings stubbornly high this year, Federal Reserve Chairman Jerome Powell said Wednesday that it will take “more time than previously expected” to have enough confidence that inflation is cooling enough to justify cutting interest rates. “It is highly likely.”
“Some of the data coming out of the jobs report weakens that story a little bit,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “They want rates cut, but they need more confidence in the inflation numbers and today’s wages data should give them a little more confidence.”
The Fed’s key interest rate remains at its highest level since 2001, and a rate cut would relieve some pressure on the economy and financial markets.
The benchmark S&P 500 stock index fell 4.2% in April, its first monthly decline since October. Signs of high inflation caused traders to dial back their hopes for when the Fed would start cutting interest rates.
Traders entered this year expecting at least six rate cuts in 2024, but are now betting big on only one or two, if any, cuts, according to CME Group data.
Friday’s market gains were broad-based, with tech stocks driving much of the gains. Apple soared 6% after announcing a massive $110 billion share buyback. The tech giant reported late Thursday that iPhone sales fell by the most on a quarterly basis since the start of the pandemic.
Microsoft rose 2.2% and Nvidia rose 3.5%.
Several companies posted profits after reporting strong quarterly results.
Amgen rose 11.8% after the biotech company provided investors with an encouraging update on a potential obesity drug. Live Nation Entertainment rose 7.2% after the ticketing company and concert promoter beat analysts’ first-quarter revenue estimates.
Telecommunications equipment maker Motorola Solutions Inc. closed 5.2% higher after the company raised its profit forecast for this year.
Booking Holdings rose 3% after first-quarter bookings and revenue beat expectations. Expedia Group, another online travel company, underperformed even though its latest quarterly results beat Wall Street targets. The company’s stock fell 15.3%, the biggest decline among S&P 500 stocks, after the company lowered its full-year booking outlook as its Vrbo rental division has been slow to recover from its transition to Expedia’s platform. became.
Overall, the S&P 500 rose 63.59 points to 5,127.79 and the Dow Jones Industrial Average rose 450.02 points to 38,675.68. The Nasdaq rose 315.37 points to close at 16,156.33.
In Europe, Germany’s DAX rose 0.6%, Paris’ CAC40 index rose 0.5%, and London’s FTSE100 index rose 0.5%.
Markets in Tokyo and mainland China were closed for the holiday. The Japanese yen rose slightly against the dollar.
Credit: AP
Credit: AP
