NEW YORK, May 4 — A gauge of global stocks rallied while Treasury yields fell yesterday after a US payrolls report was softer than anticipated, easing concerns the Federal Reserve would keep interest rates higher for longer.
Nonfarm payrolls rose by 175,000 last month, the lowest since October 2023, and short of the 243,000 estimate of economists polled by Reuters.
The 3.9 per cent annual change in average hourly earnings was the smallest since May 2021 and continued a steady decline toward the mid-3 per cent range, which policymakers feel is consistent with their 2 per cent inflation target.
Recent data on inflation and the labour market had fuelled concerns the Fed could would be forced to keep rates higher for longer than the market was anticipating, or even raise rates again.
But at the end of its policy meeting on Wednesday, Fed Chair Jerome Powell the next move in rates would be down, seeing an unlikely chance of a rate hike.
“The combination of how Powell characterized the committee’s stance on hikes relative to the data they were getting and then today’s job reports, which was good but not super worrisome, especially on the wage side, it’s setting up for kind of what we thought we had at the end of last year,” said Scott Ladner, chief investment officer at Horizon Investments in Charlotte, North Carolina.
On Wall Street, US stocks rallied, with each of the three major indexes up more than 1 per cent and the Nasdaq leading the advance with a jump of about 2 per cent.
Tech SPLRCT was the top performing of the 11 major S&P sectors, getting an additional boost from a jump of about 5.97 per cent in Apple, after the iPhone maker reported its quarterly earnings and announced a record US$110 billion stock buyback plan.
Of the 397 companies in the S&P 500 that have reported earnings through yesterday morning, 76.8 per cent have topped analyst expectations, according to LSEG data, compared with the 67 per cent beat rate since 1997 and the 79 per cent over the past four quarters.
The Dow Jones Industrial Average rose 450.02 points, or 1.18 per cent, to 38,675.68; the S&P 500 gained 63.59 points, or 1.26 per cent, to 5,127.79; and the Nasdaq Composite gained 315.37 points, or 1.99 per cent, to 16,156.33.
For the week, the S&P 500 gained 0.55 per cent, the Nasdaq rose 1.43 per cent, and the Dow climbed 1.14 per cent. The Russell 2000 small cap index rose 1.56 per cent.
Treasury yields fell, along with the dollar, after the payrolls report as investors increased expectations for a rate cut this year from the Fed in September, with markets pricing in a 66.8 per cent chance for a cut of at least 25 basis points (bps), up from 61.6 per cent in the prior session, according to CME’s FedWatch Tool.
The yield on benchmark US 10-year notes US10YT=RR dropped 6.1 basis points to 4.51 per cent, from 4.571 per cent late on Thursday while the 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations, fell 6.5 basis points to 4.8119 per cent, from 4.877 per cent.
The 10-year was down nearly 17 basis points on the week, its biggest weekly drop since mid-December while the 2-year was down about 19 basis points, its biggest weekly drop since early January.
MSCI’s gauge of stocks across the globe rose 8.67 points, or 1.14 per cent, to 769.19 and was up 0.91 per cent on the week, on pace for its second straight weekly gain.
In Europe, the STOXX 600 index closed up 0.46 per cent, while Europe’s broad FTSEurofirst 300 index ended 8.84 points, or 0.44 per cent, higher.
Against the Japanese yen JPY=, the dollar weakened 0.48 per cent at 152.89 while Sterling strengthened 0.1 per cent to US$1.2547. The greenback has fallen more than 3 per cent against the yen on the week, its biggest weekly percentage decline since late November.
The yen continued its recovery from 34-year lows, capping a tumultuous week that saw suspected intervention from Japanese authorities on two occasions.
Traders suspect the authorities stepped in on at least two days this week and data from the Bank of Japan suggests Japanese officials may have spent roughly US$60 billion to defend the beleaguered yen, leaving trading desks across the globe on continued watch for further moves by the central bank.
In commodities, oil prices fell and were on course for their steepest weekly loss in three months following the jobs report.
US crude settled down 1.06 per cent to US$78.11 a barrel and Brent settled at US$82.96 per barrel, down 0.85 per cent on the day. — Reuters