May 6, 2024

After all of the up and down turmoil earlier in the week, the market ended solidly higher on Friday with the best showing in more than two months as traders welcomed cooler-than-expected U.S. employment data as a sign that inflationary

pressures on the economy are easing.

The S&P saw its best day since late February and in the process it also erased its losses for the week with a 63point advance to 5128 led by the usual heroes

in higher days such as the large technology group.

The Dow put in a 450 point gain to 38, 675led by earnings-related buying in AMGN and AAPL and the index was helped by HD and MSFT as well.

The Nasdaq, as usual on days such as this, did the best with a 315 point improvement led by the earnings-related advances mentioned above plus a huge upside push in BKNG, also on earnings. The index ended at 16,156.

The Russell 2000 Index of small stocks came along for the upside ride with a 19 point gain to 2035 while the VIX continued to plunge, now down to 13.49 as it once again gets closer to its long-term support at 12.40 after being as high as

almost 20 recently on the vicious selloffs that occur on these awful lower sessions.

The April non-farm payrolls report showed that the nation’s employers added 175,000 jobs last month, down sharply from the blockbuster increase of 315,000 in March, according to the Labor Department. The latest hiring tally came in well below the 233,000 gain that economists had predicted. Meanwhile, average hourly earnings, a key driver of inflation, rose less than expected at 0.2%.

The modest increase in hiring last month suggests the Federal Reserve’s aggressive streak of rate hikes may be finally starting to take a bigger toll on the world’s largest economy. That may help reassure the Fed that inflation will ease further, which could move the central bank closer to lowering interest rates.

The demand for labor is slowing, which will eventually ease inflation pressures, giving the Fed some leeway to cut rates later this year as slower payroll growth and fewer hours worked imply the economy is slowing at a measured pace. This jobs report is consistent with the soft-landing narrative.

Treasury yields in the bond market mostly fell following the jobs report. The yield on the 10-year Treasury, which lenders use as a guide for pricing home loans, eased to 4.5% from 4.59% late Thursday. The two-year yield, which moves more closely with expectations for the Fed, fell to4.81% from 4.88%.

The optimistic hope is that the U.S. economy remains strong enough to stay out of a recession but not so strong that it worsens the already stalled progress on inflation which is essentially the “soft-landing” the Fed is hoping to achieve as it tries to cool the rate of inflation to its target of 2%. Inflation at the consumer level stood at 3.5% in March, far below the peak of 9.1% nearly two years ago.

Stubbornly high readings on inflation this year pushed Chair Jerome Powell to say on Wednesday that it will likely take “longer than previously expected” to get enough confidence about inflation cooling enough to warrant cutting interest rates.

Some of this data coming out of the employment report dampens that narrative a little bit, as they want to cut interest rates, but they need more confidence in the inflation data and this wage data is a little bit more confidence for them.

The Fed’s main interest rate has been sitting at its highest level since 2001, and cuts would release some pressure on the economy and financial markets.

The benchmark S&P fell by 4.2% in April, its first monthly loss since October, as signals of stubbornly high inflation forced traders to ratchet back expectations for when the Fed could begin easing interest rates.

Friday’s market rally was widespread, though technology stocks powered much of the gains. AAPL jumped 6% after announcing a mammoth $110 billion stock buyback. But it reported late Thursday its steepest quarterly decline in iPhone sales since the outset of the pandemic.

Several companies notched gains after reporting strong quarterly results as AMGN climbed by 12% after the biotechnology company gave investors an encouraging update on a potential obesity drug. LYV added 7% after the ticket seller and concert promoter beat analysts’ first-quarter revenue forecasts.

MSI closed 5% higher after the communications equipment maker raised its profit forecast for the year. BKNG rose 3%after reporting better-than-expected first-quarter bookings and revenue. But another online travel company, EXPE,

didn’t fare as well, despite its latest quarterly results beating targets. Its shares slumped 15% for the biggest decline among S&P stocks after it lowered its full year bookings guidance because its Vrbo rental unit has been slow to recover from its migration to the company’s platform.

Earnings this week include: today – BCC, GT are up, TSN is down; tonight - PLTR; Tuesday – Dow component DIS plus ANET,CROX, DDOG, ROBT; Wednesday – CHK, YYD and UBER; Thursday –AKAM, RBLX, YELP; Friday – AMCX.

Economic reports will have: Thursday – weekly jobless claims; Friday – preliminary May U. of Michigan Consumer Sentiment Survey.

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