US stocks gain as surprise payrolls fall quells rate-hike fears

Wall Street’s main indexes rose on Friday after data showed the U.S. economy unexpectedly shed jobs last month, casting doubt on a potential September interest-rate hike by the Federal Reserve.

A Labor Department report showed nonfarm payrolls fell 23,000 in July, far below the 80,000 job additions that economists polled by Reuters were expecting.

“Even with a negative job print, the job market remains healthy. But it gives the Fed some room to pause in September,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial.

“It has seemed like the Fed is pressing more on the inflation front, but today’s numbers may reframe that conversation and put the labor side of the mandate in focus.”

Money market data showed traders pared back expectations for an interest-rate hike in September, with odds of an increase now at about 20%, from 55% before the report, according to data compiled by LSEG.

Under new Chair Kevin Warsh, the U.S. central bank has offered investors little forward guidance on monetary policy, sharpening the focus on economic data and commentary from policymakers.

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Payrolls, however, have a tendency to be softer in July, and economists view the labor market as being in “slow hire, slow fire” mode.

At 09:58 a.m. ET, the Dow Jones Industrial Average rose 55.37 points, or 0.10%, to 53,940.47, the S&P 500 gained 18.87 points, or 0.25%, to 7,728.83 and the Nasdaq Composite added 181.72 points, or 0.69%, to 26,530.07.

Five of the 11 S&P sectors were trading higher, with consumer discretionary leading gains, while energy lagged.

Collaboration software maker Atlassian jumped 34.5% in early trading, while chip company Microchip Tech advanced 11.4% after both forecast quarterly revenue above estimates.

The results also lifted broader sectors, with the Philadelphia chips index up 2.3% and the S&P 500 software and services index rising 1.3%.

Cybersecurity company Cloudflare also gained 12% after raising its full-year revenue forecast above estimates.

The main U.S. indexes were headed for strong weekly gains, with the S&P 500 and the Dow on track for their best week since April and the Nasdaq set for its biggest advance since May, if gains hold.

Better-than-expected results from AI-related companies this earnings season have propelled the Dow and the S&P 500 to fresh record highs, while helping the Nasdaq recover from a pullback that had briefly pushed it nearly 10% below its previous peak.

Of the over 400 companies on the S&P 500 that have reported earnings so far this quarter, more than 85% have beaten analysts’ expectations, above the 68% beat rate seen in a typical quarter since 1994, according to LSEG I/B/E/S data.

Among other movers, vacation rental company Airbnb rose 13.5% after beating second-quarter revenue estimates, while Trade Desk dropped 24.8% after the ad-tech firm forecast third-quarter revenue below expectations.

Advancing issues outnumbered decliners by a 1.95-to-1 ratio on the NYSE and by a 1.98-to-1 ratio on the Nasdaq.

The S&P 500 posted three new 52-week highs and one new low while the Nasdaq Composite recorded 71 new highs and 38 new lows.