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U.S. stocks finished Friday mostly higher, with the Dow Jones Industrial Average and S&P 500 rising modestly, as Treasury yields rose in the wake of a fresh report on the jobs market in August. U.S. markets will be closed Monday for Labor Day.
How stock indexes traded
-
The Dow Jones Industrial Average
DJIA
rose 115.80 points, or 0.3%, to close at 34,837.71. -
The S&P 500
SPX
increased 8.11 points, or 0.2%, to finish at 4,515.77. -
The Nasdaq Composite
COMP
slipped 3.15 points, or less than 0.1%, to end at 14,031.81.
For the week, the Dow climbed 1.4%, the S&P 500 advance 2.5% and the Nasdaq gained 3.2%, according to Dow Jones Market Data. The S&P 500 posted its biggest weekly gain since the week ending June 16.
What drove the market
U.S. stocks ended mostly higher Friday, as investors weighed the latest nonfarm payrolls report ahead of Labor Day weekend.
The Labor Department said Friday the U.S. economy added 187,000 jobs in August, topping economist expectations for a gain of 170,000 but still affirming a slowdown in the pace of job gains that’s likely to be welcomed by the Federal Reserve. The unemployment rate jumped to 3.8% from 3.5% in July.
The nonfarm payrolls report shows economic growth is still “solid,” which may be buoying some investors’ hopes for a “soft landing,” said Keith Lerner, co-chief investment officer at Truist Advisory Services, in a phone interview Friday. But “it’s too soon to declare that the Fed’s job is over” bringing inflation down through higher interest rates aimed at cooling the economy, he said.
Average hourly earnings rose 0.2% last month for 4.3% wage growth over the past year, the report shows. Even as wage growth slows, its year-over-year level, along with still elevated inflation, keeps the potential for another rate hike from the Fed “on the table” at its November meeting, in Lerner’s view.
Meanwhile, rising Treasury yields pressured technology and growth stocks in particular during the trading session. The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
jumped 8.3 basis points Friday to 4.173%, while two-year yields
BX:TMUBMUSD02Y
edged up almost one basis point to 4.866%, according to Dow Jones Market Data.
After a strong week for technology stocks, there may be “some profit-taking,” with investors appearing to rotate into cyclical sectors and small-cap equities
RUT,
said Lerner. The S&P 500’s tech sector closed slightly higher Friday to score a weekly gain of 4.4%, FactSet data show.
U.S. stocks initially trimmed gains Friday after remarks by Cleveland Fed President Loretta Mester, which saw Treasury yields turn mostly higher.
“Although there has been some progress, inflation remains too high,” Mester said, at an ECB research conference.
Fed officials are trying to gauge whether the current level of the Fed’s benchmark rate “is sufficiently restrictive and how long policy will need to remain restrictive to keep inflation moving down,” said Mester.
After Friday’s employment report, federal-funds futures continued to point to a high probability that the Fed will keep its benchmark rate steady at a targeted range of 5.25% to 5.5% at its policy meeting later this month, according to the CME FedWatch Tool.
“To be clear, the Fed won’t get carried away with today’s report. It’s just one that needs to be repeated on a number of occasions but there’s plenty of cause for optimism in there,” said Craig Erlam, senior market analyst at Oanda, in a note.
MarketWatch Live: Coverage of the August jobs report and the market reaction
In other economic data released Friday, a closely watched index that measures U.S. manufacturing activity rose 1.2 points to 47.6% in August, according to the Institute for Supply Management on Friday. Economists surveyed by The Wall Street Journal had forecast the index to rise to 46.6%. A reading below 50% indicates a contraction in activity.
The effects from the Fed’s monetary tightening are still working through the economy, whose strength is “remarkable” in the face of the central bank’s aggressive rate hikes since early 2022, said Steve Wyett, chief investment strategist at BOK Financial, in a phone interview Friday.
“We think the majority of the impact of what the Fed has done is still in front of us,” he said, which makes him cautious about how much further the stock market could run higher from here.
The S&P 500 has soared 17.6% so far this year, according to FactSet data.
“It just appears the stock market has built in a lot of really good news,” said Wyett. “If the Fed is able to thread the needle on this, we’re not so sure that results in a significant move higher in equities.”
Trading volume in the stock market was expected to be light Friday ahead of the three-day weekend celebrating Labor Day.
Companies in focus
-
Walgreens Boots Alliance Inc.
WBA,
-7.43%
shares dropped 7.4%, after ending at a 14-year closing low on Thursday. The drugstore chain and healthcare services company said Chief Executive Rosalind Brewer has stepped down after 2 1/2-years in the role. -
Dell Technologies Inc.
DELL,
+21.25%
stock jumped more than 21% after the technology giant posted sizable beats on profit and revenue. -
Broadcom Inc.
AVGO,
-5.46%
shares fell 5.5% after the chip and software company delivered a revenue forecast for the current quarter that failed to offer upside versus the consensus view. -
Lululemon Athletica
LULU,
+6.01%
reported same-stores sales that missed expectations, but the yoga-themed apparel maker bumped its full-year forecast higher. Shares closed 6% higher. -
Tesla Inc. stock
TSLA,
-5.06%
slumped 5.1% after the EV maker announced fresh price cuts for its Model S and Model X cars in China, two weeks after having lowered prices on those premium vehicles.
Steve Goldstein contributed to this report
