NEW YORK (AP) – Apple was at the head of a widespread rally on Wall Street on Friday after the market’s most influential company reported a better profit than expected. Stocks of beaten-down banks also leapt to recover a smidgen of their sharp losses from a brutal week.
The S&P 500 jumped 1.8 per cent, though it still turned in a modest loss for the week that was its worst in nearly two months. The Dow Jones Industrial Average climbed 546 points, or 1.7 per cent, while the Nasdaq composite rallied 2.2 per cent.
Treasury yields jumped in the bond market after a report showed hiring accelerated across the economy by much more than expected last month.
The United States (US) government’s jobs report also showed workers won bigger pay raises in April than expected.
While that’s good news, particularly when many economists fear a recession may arrive this year, the data also raises worries inflation may stay high and push the Federal Reserve to keep interest rates higher. That in turn would keep the pressure up on an already slowing economy.
The data did little to narrow the extremely wide range of possibilities for the economy that investors are forecasting for the economy, from a painful recession to a soft landing, said senior investment director at US Bank Wealth Management Bill Northey.
“Today’s jobs report likely gave both the bulls and the bears something to anchor around,” he said.
High interest rates have already caused cracks in the US banking system, and fears about what may be next to fall have rocked the industry. This week began with regulators seizing First Republic Bank, which became the third large US bank failure to hit since March.
Investors have been hunting for the next possible weak link in the system and driving down stock prices for those seen at risk of a sudden exodus by customers.
That’s even as banks protested that they were seeing deposit levels stabilise or strengthen.
Several of the hardest hit recovered some of their steep losses on Friday, adding to the ebullient mood.
PacWest Bancorp. soared 81.7 per cent, though it still lost 43.3 per cent for the week.
Western Alliance Bancorp jumped 49.2 per cent to trim its loss for the week to 26.8 per cent.
The worry is falling stock prices for banks could create a vicious cycle that causes customers to lose faith and pull their deposits, which then raises more fear for the system.
Apple didn’t rise as much as those banks on Friday, but its moves pack a more potent punch.
Apple is the most valuable stock on Wall Street, which gives its moves outsized weight on the S&P 500 and other indexes.
Its 4.7 per cent gain made it the biggest force by far lifting S&P 500. The iPhone maker reported a drop in earnings and revenue, but the results nevertheless topped analysts’ muted expectations.
The story has been similar across the broader market for results during the first three months of the year. Analysts came into this earnings reporting season with low expectations given high interest rates and a slowing economy, but the majority of companies have done better than feared.
Live Nation Entertainment jumped 15 per cent after reporting a more modest loss than analysts expected, while Cigna Group rose seven per cent after topping forecasts for profit and revenue.
On the losing end was Lyft, which slumped 19.3 per cent after it gave a weaker financial forecast for the current quarter than Wall Street expected.
It’s a contrast to competitor Uber, which rose solidly for the week following its earnings report.
In the bond market, yields leaped immediately after the jobs report as traders bet on it pushing the Fed to keep rates high for longer than earlier expected.
The Fed on Wednesday said that it wasn’t sure of its next move after raising its benchmark rate to a range of five per cent to 5.25 per cent, up from virtually zero early last year. It’s been raising rates at the fastest pace in decades to drive down inflation, but that works by slowing the economy and hurting investment prices.