US stocks saw a significant increase on Friday following a report that showed job growth in the US had slowed down. The Dow, S&P 500, and Nasdaq all experienced gains throughout the day, with the Dow rising by 481 points, or 1.3%. This increase in stock prices came after data from the Bureau of Labor Statistics revealed that only 175,000 new jobs were added in April, falling short of economists’ expectations. The unemployment rate also rose to 3.9% from the previous month’s 3.8%.
While the slowdown in job growth may be concerning for the economy, Wall Street investors viewed it positively. The Federal Reserve has been looking to slow down the economy by increasing interest rates, and a weaker job market means they can continue to keep rates high without risking a recession. If the labor market continues to weaken, there is a greater likelihood that the Fed will consider cutting rates. This news was seen as a relief for markets, as it could mean that inflation is not as severe as feared.
Following the release of the employment data, investors increased their expectations for more interest rate cuts by the Federal Reserve later in the year. The CME FedWatch tool showed that there is now nearly a 75% chance of at least one rate cut after the September meeting, up from about 62% earlier. Treasury yields also fell in response to the news, with the 10-year yield dropping to 4.51%. The relationship between treasury yields and prices is inverse.
During a press conference after the Fed’s decision to keep interest rates unchanged, Chair Jerome Powell mentioned that the central bank is prepared to act in response to any sudden drops in employment. This statement further reassured investors and the market. In terms of earnings news, Apple saw a 7% increase in its shares after reporting strong earnings for the first quarter of 2024. The tech giant also expressed confidence in surpassing sales estimates for the year, contributing to the positive sentiment in the market.
Overall, the stock market reacted positively to the news of slower job growth in the US, with significant increases in various indexes throughout the day. The implications of the data for the Federal Reserve’s future actions on interest rates and the overall economy were key factors in driving market sentiment. Investors are now anticipating potential rate cuts later in the year, which could have further effects on the market. Despite the concerns about job growth and unemployment rates, the market response to the news was generally optimistic, with potential benefits for investors and the economy as a whole.
