U.S. stocks extended early gains on Friday with all three major indexes on track to snap a four-day losing streak after data showed the pace of job creation slowed in October for the third straight month.
How are stocks are trading?
- The S&P 500 SPX, +1.54% gained 67 points, or 1.8%, to 3,785.
- The Dow Jones Industrial Average DJIA, +1.57% advanced 523 points, or 1.6%, to 32,525.
- The Nasdaq Composite rose 174 points, or 1.7%, to 10,517.
On Thursday, the major U.S. equity benchmarks finished lower for a fourth straight session with the S&P 500 falling 39.80 points, or 1.1%, to finish at 3,719.89, the Dow Jones Industrial Average closing 146.51 points lower, down 0.5%, at 32,001.25, after dropping as much as 420 points at its session low, while the Nasdaq Composite shed 181.86 points, or 1.7%, to end at 10,342.94.
Need to know: Traders are loading up on bets against the stock market — and this time, it’s not a contrarian signal, says Citi
What’s driving markets?
Stocks were back in rally mode on Friday for the first time this week as the October employment report showed the U.S. economy added 261,000 jobs last month, beating a forecast for 205,000 new jobs.
Investors found some solace in the fact that the rate of new job creation slowed for the third straight month in October. The headline nonfarm payrolls number was also the lowest print since December 2020, when the U.S. economy saw more than 100,000 jobs disappear.
Market analysts and economists pointed out that the jobs data struck a happy medium: not weak enough to hint at a coming recession, while also not being strong enough to pressure the Federal Reserve to consider an even more aggressive program of interest rate hikes, according to Marvin Loh, senior global macro strategist at State Street.
Certain details of the report, including rise in the unemployment rate and the decline in the labor-force participation, which dipped to 62.2% from 62.3%, suggested that the labor market is beginning to soften, which in turns suggests that the Fed’s inflation-fighting rate hikes are beginning to work, Loh added.
“It’s not a universally strong number, but it’s not a number that lets you believe that the Fed can pivot. However, it does give you hope that we can see an end to the rate hikes some time in early 2023,” Loh said.
While equity investors may like the data, analysts pointed out that the October jobs report hasn’t changed the outlook for Fed policy, which means markets will likely remain volatile as the Fed continues to raise interest rates into next year.
“The net read is that the labor market is still far too tight and cooling only very gradually,” said Alex Pelle, U.S. economist at Mizuho.
Fed funds futures markets still anticipate that the Fed’s benchmark rate will peak north of 5% next spring.
Despite Friday’s gains, all three major U.S. indexes were still facing weekly losses, led by the Nasdaq, which was set for a 6.5% drop as of early Friday, what would be its biggest weekly drop since January, according to Dow Jones Market Data.
Stocks have faced pressure this week after Federal Reserve Chairman Jerome Powell made clear on Wednesday that the central bank is nowhere near ending a campaign to raise interest rates.
The Fed raised its benchmark rate by 75 basis points, as expected, and Powell told a news conference that it was “very premature to be thinking about pausing.” He hinted that the fed-funds rate may need to surmount 5% and stay there awhile in order to drive inflation back toward the central bank’s 2% target.
Read: Why the car market might be ‘the harbinger’ of when the Fed can pivot
Treasury yields slipped after a volatile morning, with the 2-year yield down 4 basis points at 4.675% TMUBMUSD02Y, 4.679%.
Oil prices were also climbing, with crude futures up over 4% to $92 a barrel, while the dollar backpedaled DXY, -1.66% to 111.89 on the ICE U.S. Dollar Index.
Adding to the positive sentiment, the Hang Seng Index HSI, +5.36% finished 5.3% higher, on Friday, cementing its biggest weekly gain in more than a decade, with tech stocks leading the way on fresh speculation China may ditch its zero COVID policies. Several U.S.-listed Chinese stocks were trading higher in premarket, such as Alibaba Inc. BABA, +6.61%, up 9%, Bilibili Inc. BILI, +13.59%, up almost 14% and Nio Inc. NIO, +15.69%, up nearly 11%.
What companies are in focus?
- PayPal Holdings Inc. PYPL, -2.55% stock fell 2.8% after the digital payments group cut its revenue forecast late Thursday.
- Starbucks Corp. SBUX, +9.65% shares climbed 9.3% Friday after the coffee giant posted forecast -beating results and said same-store sales will be “near the high end” of financial targets.
- Cardinal Health Inc. CAH, +5.13% shares were up 5.4% and moving towards a five-year high after the drug and laboratory products distributor reported big beats on profit and revenue and affirmed its outlook.
- DraftKings Inc. DKNG, -24.20% shares tumbled more than 22% after the company posted a third-quarter net loss of $450.5 million, or $1 a share.
- A jump in copper HG00, +7.19% and gold prices helped shares of Freeport-McMoRan Inc. FCX, +11.64% to become the top performer on the S&P 500 Friday with a gain of nearly 13%.