Wall Street Jumps and Nearly Escapes Its Bear Market After Strong Jobs Report of 102.3 KRMG

NEW YORK — (AP) Stocks rallied higher on Friday afterward a strong report on the US labor market suggested that a recession may not be as close as Wall Street had feared.

The S&P 500 rose 1.5% for the latest gain in a rally that has risen nearly 20% since mid-October. That put Wall Street’s main measure of health on the verge of entering a so-called bull market, despite a long list of challenges.

The Dow Jones Industrial Average rose 701 points, or 2.1%, while the Nasdaq composite gained 1.1%.

The indexes were boosted after a report showed employers unexpectedly accelerated their hiring last month. It’s the latest signal that the job market remains remarkably solid despite much higher interest rates, and it provides a solid prop for an economy that’s starting to slow down.

Parts of the market that do best when the economy is healthy led to a widespread rally, including shares of industrial companies, energy producers and banks. Exxon Mobil rose 2.3% as crude oil prices rose on hopes that a resilient economy would consume more fuel.

Perhaps more importantly for the markets, the Labor Department’s monthly jobs report also showed a slowdown in worker wage increases, even as hiring strengthened.

While this may discourage workers from keeping up with prices at the checkout, investors believe lower wage increases will ease upward pressure on inflation across the economy.

That in turn could allow the Federal Reserve to slow down interest rate hikes are designed to lower inflation. High rates do that by slowing the economy and hurting investment prices, and they’ve already hurt the banking and manufacturing industries.

The unemployment rate also rose more than expected last month, to 3.7% from a five-decade low. That implies a bit more leeway in the job market and seems to run counter to gangbusters’ numbers, whose data comes from a separate survey.

The reality is probably somewhere in between, says Brian Jacobsen, chief economist at Annex Wealth Management.

One thing that stands out is that if you compare today’s total payrolls to the pre-COVID trend, we still have more than four million job openings to fill, he said. COVID led to strange times, a strange recovery and an even stranger slowdown.

Following the report, traders largely expected the Fed to hold interest rates steady at its next meeting in two weeks. If so, that would be the first time it hasn’t raised rates in over a year.

A pause in rate hikes would provide some breathing room for an economy that has seen a sharp contraction in output for months. Higher rates have also hurt many smaller and medium-sized banks, in part because customers have attracted deposits in search of higher interest rates from money market funds.

Multiple high-profile bank failures since March have shaken the market, leaving Wall Street on the hunt for other possible weak links. Several under the heaviest scrutiny gathered after the jobs report. PacWest Bancorp, for example, jumped 14.1% to cut its loss for the year to 66.6%.

But Fed officials also recently warned that a pause in rate hikes in June wouldn’t necessarily mean the end of rate hikes.

Traders are increasingly expecting the Fed to follow up a lull in June with a rate hike in July, according to data from CME Group. That helped raise government bond yields.

The yield on the 10-year Treasury rose from 3.60% at the end of Thursday to 3.69%. It helps set rates for mortgages and other important loans.

Two-year Treasury yields, which move more based on expectations for Fed action, rose from 4.34% to 4.50%.

Also helping to support Wall Street was the Senate’s final approval late Thursday a deal that would allow the US government to avoid a potentially catastrophic bankruptcy on his fault. The move was widely anticipated by investors, and the deal goes alongside President Joe Biden for his signature.

Lululemon Athletica rose 11.3% after reporting stronger-than-expected earnings for its last quarter, driven by accelerating sales trends in China and other factors. It also raised its forecast for full-year results.

MongoDB rose 28% after the database company reported larger-than-expected profits. The company said it is confident it will benefit from the wave of enthusiasm surrounding artificial intelligence sweeping the business world.

A frenzy around AI helped the S&P 500 climb to its highest levels since August. For example, Nvidia, whose chips help drive the move to AI, is up 169% this year.

Big gains for Nvidia and a small group of other stocks have been the main reason why the S&P 500 has come so close to its breakaway market, which saw a 25.4% drop in nine months from early January 2022 to October.

Only a handful of stocks accounted for most of the S&P 500’s gains, and critics say that means the index may not be as strong as it seems. While the S&P 500 is up 11.5% for the year so far, nearly half of the stocks in the index have lost ground on concerns about falling earnings, still high inflation and much higher interest rates.

All told, the S&P 500 rose 61.35 to 4,282.37 on Friday. The Dow Jones rose 701.19 to 33,762.76 and the Nasdaq rose 139.78 to 13,240.77.

AP Business Writers Matt Ott and Joe McDonald contributed.

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