Wall St ends sharply higher, jobs data strengthens case for rate cuts

On the Dow it was a straight shot up 600 points right out the gate and took only a modest decline from there to end the session up 450.  The other indexes had similar sessions. It was a second day of “bad news = good news” as job growth slowed down, unemployment went up and wage growth cooled, in other words, very good news on the inflation front and very much raising expectations of a first rate cut come September. 

The good news: “The investor narrative remains the Fed and interest rates and today’s weak jobs report puts rate cuts firmly on the Fed’s 2024 agenda. This economic data is being warmly embraced by investors.” The better news: “I don’t think for a second any Fed official really believes that a rate hike is appropriate given current conditions.” 397 S&P companies have now reported Q1 earnings with 77% beating estimates. Volume was a tad below average at 10.72 billion. 

Wall St ends sharply higher, jobs data strengthens case for rate cuts

By Stephen Culp

Fri May 3, 2024 4:19 PM

DJ: 38,225.66  +322.37        NAS: 15,840.96  +235.48        S&P: 5,064.20  +45.81     5/2

DJ: 38,675.68  +450.02        NAS: 16,156.33  +315.37        S&P: 5,127.79  +63.59     5/3

NEW YORK, May 3 (Reuters) - Wall Street surged to a higher close on Friday as a softer-than-expected employment report bolstered the case for rate cuts from the Federal Reserve while also providing evidence of U.S. economic resilience.  All three major U.S. stock posted robust gains. The tech-heavy Nasdaq led the pack, rising 2% with an assist from Apple shares (AAPL.O), opens new tab following the iPhone maker's record share buyback announcement.  All three indexes notched their second straight Friday-to-Friday gains, capping a week in which markets were encouraged by Fed Chair Jerome Powell's more dovish-than-expected statements following Wednesday's rate decision.  The Labor Department's employment report showed the U.S. economy added fewer jobs than expected, while the unemployment rate ticked higher and wage growth unexpectedly cooled.

The report likely hit the sweet spot for the Fed, offering signs the labor market is softening, which Powell has deemed necessary to put inflation on a sustainable downward path. The report also provided assurances on U.S. economic health.  The report prompted investors to raise bets the Fed would implement its first rate reduction in September.

"The investor narrative remains the Fed and interest rates and today’s weak jobs report puts rate cuts firmly on the Fed’s 2024 agenda," said Greg Bassuk, CEO at AXS Investments in New York. "And while 'higher for longer' remains the roadmap, this economic data is being warmly embraced by investors, Wall Street and Main Street, across all sectors." 

Fed officials weighed in on the data.  Fed Governor Michelle Bowman reiterated her willingness to hike rates if inflation progress reverses, and Chicago Fed President Austan Goolsbee said the employment report boosted confidence the economy is not overheating.  "Let's remember, it's early May; we shouldn't pretend that the year's over or somehow every card has been played," said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. "But I don't think for a second that any Fed official really believes that a rate hike is appropriate given current conditions and data."

First-quarter earnings season is approaching the final stretch, with 397 of the companies in the S&P 500 having reported as of Friday morning. Of those, 77% have posted consensus-beating results, according to LSEG data.  Apple surged 6.0%, after the company unveiled a record $110 billion share buyback program and beat quarterly expectations.  Shares of biotech firm Amgen (AMGN.O), opens new tab jumped 11.8% after encouraging interim data on its experimental weight-loss drug MariTide and first-quarter earnings.  Travel platform Expedia (EXPE.O), opens new tab cut its full-year revenue growth forecast, sending its shares sliding 15.3%.

The Dow Jones Industrial Average (.DJI), opens new tab rose 450.02 points, or 1.18%, to 38,675.68, the S&P 500 (.SPX), opens new tab gained 63.59 points, or 1.26%, to 5,127.79 and the Nasdaq Composite (.IXIC), opens new tab added 315.37 points, or 1.99%, to 16,156.33.  Of the 11 major sectors in the S&P 500, all but energy (.SPNY), opens new tab ended the session in positive territory, with technology (.SPLRCT), opens new tab claiming the largest percentage gain at 3.0%.

Advancing issues outnumbered declining ones on the NYSE by a 3.62-to-1 ratio; on Nasdaq, a 2.00-to-1 ratio favored advancers.  The S&P 500 posted 21 new 52-week highs and one new low; the Nasdaq Composite recorded 95 new highs and 65 new lows.

Volume on U.S. exchanges was 10.72 billion shares, compared with the 11.07 billion average for the full session over the last 20 trading days.