Wall Street ended up on the jobs data, avoiding a debt default

  • Nasdaq posted its best weekly winning streak since January 2020
  • The data shows that the unemployment rate was 3.7% in May. moderate wage growth
  • Amazon accesses a report on its talks for low-cost mobile services
  • Materials is driving the S&P sector’s gains, and Nvidia is falling again

(Reuters) – U.S. stocks closed higher on Friday after a labor market report showing moderate wage growth in May suggested the Federal Reserve could skip an interest rate hike within two weeks, while investors cheered Washington’s deal that averted a catastrophic debt default. .

The high-tech Nasdaq (.IXIC) rose to a 13-month high and posted its sixth straight week of gains marking the best winning streak since January 2020.

U.S. job growth accelerated in May, but the unemployment rate rose to a seven-month high of 3.7% as more people looking for work indicated that labor market conditions were softening, the Labor Department said.

The jump in the unemployment rate from a 53-year low of 3.4% in April reflected a decline in household workers and a rise in the total workforce. A larger pool of labor eases pressure on companies to raise wages and help slow inflation.

“While it appears to be a hot number on actual headcount, the pay rate is not rising as quickly,” said Kim Forrest, chief investment officer at Bouquet Capital Partners in Pittsburgh. “This is a mitigating effect and is this the legendary soft landing? It looks like this.”

The data brought relief to investors who mostly expect the Fed to hold off on raising interest rates at its June 13-14 policy meeting. This will be the first pause since the Fed began tightening its aggressive anti-inflationary policy more than a year ago.

But some pointed to the hotter-than-expected jobs data as a sign that the Fed has yet to tame inflation.

“Our view has been and remains that the market is completely wrong in assessing what the Fed is doing,” said Phil Orlando, senior equity analyst at Federated Hermes in New York.

“The market perception is that this economy is going to cool down, that inflation is going to crash and the Fed is going to turn around and start cutting rates. That’s wrong.”

Fed funds futures showed a 71.3% probability that the Fed will keep interest rates steady in two weeks, down from 79.6% on Thursday, according to CME Group’s FedWatch Tool.

Markets are now awaiting data on key consumer prices a day before the Fed’s interest rate decision in two weeks.

Reuters Graphics Reuters

The Senate passed a bill late Thursday to raise the government’s debt ceiling of $31.4 trillion, averting what could have been catastrophic, the first-ever default.

The vote’s passage eased investor fears as Wall Street’s measure of fear, the CBOE Volatility Index (.VIX), fell to its lowest level since November 2021, down 1.1 points at 14.6.

The Dow Jones Industrial Average rose 701.19 points, or 2.12%, to 33,762.76 points, the Standard & Poor’s 500 rose 61.35 points, or 1.45%, to 4,282.37 points, and the Nasdaq Composite rose 139.78 points, or 1.07%, to 13,240.77.

For the week, the S&P 500 was up 1.82%, the Dow Jones was up 2.02% and the Nasdaq was up 2.04%.

Trading volume on US exchanges reached 11.05 billion shares compared to an average of 10.58 billion shares for the full session over the last 20 trading days.

Shares of Verizon Communications Inc (VZ.N), AT&T Inc (TN), and T-Mobile US Inc (TMUS.O) fell after a report said Amazon.com Inc (AMZN.O) is in talks with the US carrier for an offer. Low cost wireless services for its prime members.

Verizon fell 3.2%, while AT&T and T-Mobile fell 3.8% and 5.6%, respectively; Amazon gained 1.2%.

All 11 sectors of the S&P 500 advanced, with the materials index advancing (.SPLRCM), up 3.4%, and the consumer discretionary (.SPLRCD), and Amazon housing, advancing, up 2.2%.

Nvidia Corp. (NVDA.O) fell 1.1% for a second day of declines after briefly entering Wednesday into the elite club of $1 trillion or more megacap stocks on hopes that artificial intelligence will bring big returns in the future.

But Nvidia’s rise of nearly 170% year-to-date shines a spotlight on investors in a market dominated by the outperformance of giant jets while most other companies tread water.

“No one really explained to me how they were going to make any money from it,” said Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management in Punta Gorda, Florida. “A company like Nvidia is growing so much in such a short period of time, it just doesn’t make sense.”

Advance issues outnumbered declining issues on the NYSE by a ratio of 4.75 to 1; On the Nasdaq, a ratio of 2.73 to 1 favored advanced stocks.

S&P 500 hits new 52-week high and two new lows; The Nasdaq index posted 74 new highs and 40 new lows.

Additional reporting by Herbert Lash, Shrishi Sanyal, Shristi Achar A and Shashwat Chauhan, in Bengaluru; Editing by Nivedita Bhattacharjee and Magu Samuel

Our Standards: The Thomson Reuters Trust Principles.

Shrishi Sanyal

Thomson Reuters

Reports on global financial markets of great interest, covering a range of asset classes. In the game for more than 5 years. You can reach her at – +917483273460

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