U.S. Stock Market Surges to New Heights After Mixed Jobs Report

U.S. stocks achieved record highs on Friday as newly released data indicated that the job market remains robust enough to sustain economic growth, while also alleviating concerns about immediate inflationary pressures.

The S&P 500 index rose 0.2%, reaching an all-time high, marking its third consecutive week of gains. This performance contributes to what is shaping up to be one of the strongest years for the index since the dot-com bubble burst in 2000. Conversely, the Dow Jones Industrial Average fell by 123.19 points, or 0.3%, while the Nasdaq composite climbed 0.8% to establish its own record.

Insights from the Jobs Report

The day’s trading was relatively quiet, following the release of the latest jobs report, which delivered mixed results. The report revealed that U.S. employers hired more workers than anticipated last month, yet the unemployment rate rose unexpectedly from 4.1% to 4.2%.

Lindsay Rosner, head of multi-sector investing at Goldman Sachs, commented, “This print doesn’t kill the holiday spirit, and the Fed remains on track to deliver a cut in December.”

The Federal Reserve has been actively lowering its primary interest rate since September, pulling it down from a two-decade high to support a sluggish job market and bring inflation closer to its 2% target. While reducing interest rates can foster economic activity, it can also lead to increased inflation.

Speculation about multiple interest rate cuts from the Fed has largely contributed to the S&P 500’s achievement of record highs 57 times this year. This trend is part of a wider global movement, as 62 central banks have lowered rates over the past three months, marking the highest number of cuts since 2020, according to strategists from Bank of America.

Further Cautions and Market Reactions

Despite the positive tone set by the jobs report, there are underlying cautionary notes for Federal Reserve officials. Scott Wren, a senior global market strategist at Wells Fargo Investment Institute, highlighted that average wages increased slightly more than economists had predicted last month. While higher wages are beneficial for workers, they could contribute to ongoing inflationary pressures.

Wren remarked, “This report tells the Fed that they still need to be careful as sticky housing, shelter, and wage data show that it won’t be easy to engineer meaningfully lower inflation from here in the nearer term.”

Currently, traders anticipate an 85% likelihood that the Fed will reduce its main interest rate in two weeks. However, there is greater uncertainty regarding how many further cuts may occur next year, as indicated by data from CME Group.

For now, there is optimism that the job market will empower U.S. consumers to continue spending, helping the economy avoid a recession that seemed imminent when the Fed began aggressively increasing interest rates to combat inflation.

Positive earnings from several retailers provided further encouragement. For instance, Ulta Beauty shares surged 9% after exceeding both profit and revenue expectations, driven by revenue gains from new store openings and an upward adjustment of its sales forecast. Meanwhile, Lululemon shares increased by 15.9% after reporting strong sales growth outside the United States.

Retailers have been signaling mixed messages regarding consumer resilience amid a slowing job market and persistent inflation. For example, Target forecasted a weak outlook for holiday shopping, while Walmart expressed more optimism.

A recent report indicated that U.S. consumer sentiment may be improving more than anticipated. The preliminary reading from the University of Michigan’s survey reached its highest level in seven months, reflecting increased buying activity as consumers attempted to make purchases ahead of projected price hikes due to impending tariffs.

In the technology sector, Hewlett Packard Enterprise saw a significant jump of 10.6% following better-than-expected earnings reports. Tech stocks have been performing strongly, with companies like Salesforce benefiting from the current boom in artificial intelligence.

Overall, the S&P 500 increased by 15.16 points, closing at 6,090.27. The Dow dropped 123.19 points to 44,642.52, while the Nasdaq composite gained 159.05 points to reach 19,859.77.

Market Movements Abroad

In the bond market, the yield on the 10-year Treasury fell to 4.15% from 4.18% late the previous day.

Internationally, France’s CAC 40 climbed 1.3% after President Emmanuel Macron announced his intention to remain in office until the end of his term and promised to appoint a new prime minister shortly. Earlier this week, lawmakers on both the far-right and left approved a no-confidence motion that forced Prime Minister Michel Barnier and his cabinet to resign.

In Asia, stock indexes showed mixed results. Hong Kong and Shanghai saw gains of 1.6% and 1%, respectively, ahead of an annual economic policy meeting scheduled for next week. The Kospi in South Korea fell by 0.6%, as the ruling party’s leader supported suspending President Yoon Suk Yeol’s constitutional powers amidst ongoing political turmoil.

Finally, Bitcoin fluctuated near $101,500 after reaching a record of over $103,000 the day before.

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