Wall Street experienced a turbulent trading day on Friday, with markets closing slightly higher, marking the second consecutive week of gains. The early boost was attributed to a much-anticipated government report indicating a moderate, yet healthy, increase in U.S. job growth last month. This data has sparked optimism among investors, who hope that the Federal Reserve may hold off on further interest rate hikes as it attempts to curb inflation. However, despite an initial surge of as much as 0.8% following the jobs report, the major indexes fluctuated throughout the day, wavering between minor gains and losses.
The Standard & Poor’s 500 closed 0.2% higher, rebounding from its first monthly loss since February. The Dow Jones industrial average rose by 0.3%, while the Nasdaq composite ended with a marginal dip of less than 0.1%, breaking its five-day winning streak. The Labor Department’s Friday report revealed that employers added a robust 187,000 jobs in August, a marked increase from July’s revised gain of 157,000. This points towards a slowing pace of hiring compared to earlier this year, with the economy adding 449,000 jobs from June through August, the lowest three-month total in three years.
Wall Street Ends Choppy Week with Slight Gains
Wall Street experienced a turbulent day of trading on Friday, which concluded with a slight increase for stocks, marking the market’s second winning week in a row.
Employment Report Fuels Market Boost
The market received a boost from a government report showing a moderate but healthy increase in U.S. job growth last month. The report heightened investor optimism that the Federal Reserve may refrain from further interest rate hikes, even as it aims to curb inflation.
Despite showing an initial rise of 0.8% after the release of the jobs report, the major indexes spent the day wavering between minor gains and losses, shedding most of their gains. The Standard & Poor’s 500 closed 0.2% higher, while the Dow Jones industrial average rose by 0.3%. The Nasdaq composite, however, closed less than 0.1% lower, breaking its five-day winning streak.
Labor Market Report Details
The Labor Department reported that employers added a solid 187,000 jobs in August. Although this figure marked an increase from July’s revised gain of 157,000, it still suggests a moderating pace of hiring compared to earlier this year. From June through August, the economy added 449,000 jobs, the lowest three-month total in three years.
The report also revealed that the unemployment rate increased from 3.5% to 3.8%, the highest level since February 2022, albeit still low by historical standards.
Fed’s Stance on Interest Rates
Wall Street warmly received the latest monthly labor market snapshot as it hopes for signs of lower inflation and cooling job growth, which may prompt the Fed to halt its rate hike campaign. “Today’s employment report will add to recent data which indicates the Fed can pause on raising interest rates,” stated Steve Wyett, chief investment strategist of BOK Financial.
The robust job market, combined with consumer spending, has so far prevented a recession that analysts anticipated at some point in 2023. However, these conditions have complicated the central bank’s task of reining in inflation by driving up wages and prices.
The central bank has aggressively raised its primary interest rate since 2022 to the highest level since 2001 with the aim of bringing inflation back to the Fed’s 2% target. The Fed has asserted that it is prepared to continue raising interest rates if necessary, but its next moves will be guided by the latest economic data.
Market Influencers and Takeaways
Rising oil prices helped boost energy stocks, with Exxon Mobil and Chevron rising 2.1% and 2%, respectively. The price of U.S. crude oil climbed 2.3%, extending its weekly gain to 7.3%. This increase is attributed to ongoing production cuts by major producers, a trend that many industry analysts expect Saudi Arabia to extend through October.
Yet, not all sectors experienced gains. Communications stocks, for example, suffered losses, with Disney dropping 2.4% after pulling its programming from Charter Communications’ Spectrum TV due to a failed distribution deal negotiation.
Furthermore, Walgreens Boots Alliance fell 7.4% after announcing that CEO Rosalind Brewer will step down at the end of the month, with Ginger Graham taking over as interim CEO.
Despite Friday’s choppy trading, the overall trend suggests cautious optimism in the market, buoyed by signs of a robust job market and hopes of a pause in the Fed’s interest rate hikes. This scenario, however, also underscores the delicate balance the Fed must strike between supporting economic growth and managing inflation.