AP – Wall Street capped a choppy week of trading on Friday with the best day for the stock market in over two months, as traders welcomed cooler-than-expected United States (US) employment data as a sign that inflationary pressures on the economy are easing.
The S&P 500 rose 1.3 per cent, its best day since late February. The benchmark index also erased its losses for the week.
The Dow Jones Industrial Average rose 1.2 per cent. The Nasdaq composite ended two per cent higher, reflecting strong gains by technology sector stocks, which accounted for much of the rally.
The nation’s employers added 175,000 jobs last month, down sharply from the blockbuster increase of 315,000 in March, according to the Labor Department. The latest hiring tally came in well below the 233,000 gain economists had predicted. Meanwhile, average hourly earnings, a key driver of inflation, rose less than expected.
The modest increase in hiring last month suggests the Federal Reserve’s (Fed) aggressive streak of rate hikes may be finally starting to take a bigger toll on the world’s largest economy. That may help reassure the Fed that inflation will ease further, which could move the central bank closer to lowering interest rates. “The demand for labour is slowing, which will eventually ease inflation pressures, giving the Fed some leeway to cut rates later this year,” said Chief Economist for LPL Financial Jeffrey Roach.
“Slower payroll growth and fewer hours worked imply the economy is slowing at a measured pace. This jobs report is consistent with the soft landing narrative.”
Treasury yields in the bond market mostly fell following the jobs report. The yield on the 10-year Treasury, which lenders use as a guide for pricing home loans, eased to 4.5 per cent from 4.59 per cent late on Thursday. The two-year yield, which moves more closely with expectations for the Fed, fell to 4.81 per cent from 4.88 per cent.
The US economy is in a tight spot, where the hope is that it remains strong enough to stay out of a recession but not so strong that it worsens the already stalled progress on inflation.
That is essentially the “soft landing” the Fed is hoping to achieve as it tries to cool the rate of inflation to its target of two per cent. Inflation at the consumer level stood at 3.5 per cent in March, far below the peak of 9.1 per cent nearly two years ago.
