TLDR
- S&P 500 gained 0.62% Friday, reaching a record close after weaker July employment data.
- Nasdaq Composite climbed 1.3%, supported by strong gains in semiconductor and software stocks.
- US employers cut 23,000 jobs in July, far below economists’ forecast for payroll growth.
- Most Fed futures traders now expect interest rates to remain unchanged at September’s policy meeting.
- Oil prices rose as markets monitored possible US-Iran talks over reopening the Strait of Hormuz.
The S&P 500 reached a fresh record close on Friday as weaker-than-expected US jobs data reduced expectations for another Federal Reserve interest rate increase in September. The index gained 0.62% to finish at 7,757.64, while the Nasdaq Composite rose 1.3% to 26,690.62.
The Dow Jones Industrial Average added 151.83 points, or 0.28%, to close at 54,036.93. The three major indexes recorded their second straight weekly gains, with each posting its strongest weekly performance since April.
The S&P 500 advanced 3.6% for the week after moving above 7,700 for the first time earlier in the period. The Nasdaq gained 5.2%, supported by a recovery in semiconductor stocks, while the Dow rose nearly 3%.
Weak Jobs Data Shifts Rate Expectations
US employers cut 23,000 jobs in July, compared with economists’ forecast for an increase of 83,000. The unemployment rate fell to 4.1% from expectations of 4.2%, while the labor force participation rate dropped to its lowest level in more than five years.
The weaker employment figures changed expectations for the Federal Reserve’s September policy meeting. Fed funds futures showed that most traders expected the central bank to keep its benchmark rate at 3.50% to 3.75%.
A day earlier, traders had priced in a 55% chance of a quarter-point rate increase. The shift came as markets assessed the weaker labor market alongside inflation and Treasury yields.
Nuveen Chief Investment Officer Saira Malik said, “For the job market this is a number that’s not booming and may actually be breaking, but for the markets the two biggest areas of concern were yields and inflation.” She added that the data “helps not reinforce the Fed’s narrative that they need to raise interest rates.”
Software and Chip Stocks Lead Weekly Gains
Software stocks contributed to Friday’s advance after recent corporate earnings reduced concerns about artificial intelligence disrupting parts of the industry. Cloudflare shares gained more than 5% after the company provided a firm outlook for the current quarter and full year.
Atlassian shares jumped 35% after its fourth-quarter adjusted earnings and revenue exceeded expectations. The company also issued an upbeat outlook. Airbnb shares rose 17% after the vacation rental company reported better-than-expected results for both revenue and earnings.
Semiconductor stocks also recorded a strong week. The iShares Semiconductor ETF gained more than 7%, helping the Nasdaq post a larger weekly advance than the other major indexes.
Oil Prices Rise as Strait of Hormuz Talks Continue
Oil prices moved higher as investors monitored possible talks between the United States and Iran over reopening the Strait of Hormuz. West Texas Intermediate crude for September delivery rose 1.15% to settle at $78.18 a barrel.
Brent crude, the international benchmark, gained 1.29% to settle at $83.55 a barrel. The market continued to monitor developments around the key shipping route and potential changes in regional supply conditions.
U.S. Bank Asset Management Chief Equity Strategist Terry Sandven said, “The conclusion is that a resolution will be forthcoming in the not too distant future,” while warning that a change in those conditions could bring renewed market concern.
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