Wall Street’s main indexes edged higher on Friday as gains in megacap stocks outweighed pressure from a stronger-than-expected jobs report that tempered expectations of rapid interest rate cuts this year.
A Labor Department report showed U.S. employers hired more workers than expected in December, while raising wages at a solid clip. The unemployment rate held steady from November at 3.7%, compared with expectations of a 3.8% rise, while average earnings advanced 0.4% on a monthly basis, against forecasts of 0.3% growth.
“While the data confirms that the economy is strong and that a soft landing is in play, it’s a bit of a reality check for a market that was slightly ahead,” said Ross Mayfield, investment strategy analyst at Baird.
“This report certainly pushes expectations out a little bit and May is probably a good base case to use right now (for rate cuts).”
Money markets have scaled back expectations for a rate cut in March, with traders now seeing a 57% chance of at least a 25-basis point cut, from nearly 65% before the data, according to the CME Group’s FedWatch tool.
Meanwhile, the Institute of Supply Management’s (ISM) report showed U.S. services activity slowed considerably in December, with the purchasing manager’s index (PMI) at 50.6, against expectations of 52.6.
Big tech stocks including Amazon.com, Nvidia and Alphabet edged higher between 0.4% and 1.2%, cushioning the indexes.
On a weekly basis, the benchmark S&P 500 was on track for its worst performance since late October as investors cashed in after a nine-week winning streak driven by bets that aggressive rate cuts were on the horizon.
The Nasdaq was on course for its worst week since late September, impacted by rotation out of tech-heavy stocks into defensive sectors like healthcare, financials and utilities.
At 10:00 a.m. ET, the Dow Jones Industrial Average was up 65.67 points, or 0.18%, at 37,506.01, the S&P 500 was up 17.55 points, or 0.37%, at 4,706.23, and the Nasdaq Composite was up 48.55 points, or 0.33%, at 14,558.85.
Financials and energy stocks led advances among the 11 S&P 500 sectors, up 0.7% and 0.6%, respectively.
In company news, Applied Therapeutics tumbled 31.9% after the drug developer’s heart disease drug showed disappointing results in a late-stage trial.
Palantir Technologies lost 1.6% after Jefferies downgraded the data analytics firm to “underperform” due to high stock valuations.
Peloton jumped 11.9% after the fitness equipment maker said it will bring its workout content to short-form video platform TikTok in an exclusive partnership.
Later in the day, investors will parse remarks by Richmond Fed President Thomas Barkin, a voting member this year.
Advancing issues outnumbered decliners by a 1.68-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.08-to-1 ratio on the Nasdaq.
The S&P index recorded four new 52-week highs and no new low, while the Nasdaq recorded 21 new highs and 42 new lows.
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