US stocks rise after weaker jobs data ease concerns over interest-rate hikes

Major Wall Street indexes advanced on Thursday after the June US jobs report came in weaker than expected, easing investor concerns that the Federal Reserve could raise interest rates in the coming months.

The closely watched nonfarm payrolls report showed that the US economy added 57,000 jobs last month, compared with economists’ expectations for a gain of 110,000 jobs.

At the same time, the unemployment rate stood at 4.2%, versus expectations that it would remain unchanged at 4.3%.

The report snapped a streak of strong labor-market readings seen in recent months, potentially giving the Federal Reserve more room to remain patient on borrowing costs.

According to data compiled by the London Stock Exchange Group, the probability of at least one interest-rate hike this year fell to 76%, down from about 84% before the jobs report was released.

“It’s an excellent reading and probably the best outcome we could have hoped for,” said Florian Ielpo, Head of Macro Research at Lombard Odier Investment Managers. “It shows the labor market remains in good shape, but not so hot that it risks fueling inflation further.”

As of 9:48 a.m. Eastern Time, the Dow Jones Industrial Average was up 447.72 points, or 0.86%, at 52,752.96.

The S&P 500 gained 49.84 points, or 0.67%, to 7,533.51, while the Nasdaq Composite rose 146.99 points, or 0.56%, to 26,187.02.

Jobs data shift Fed focus toward labor market as Middle East risks persist

Markets had feared that stronger labor-market data would give the Federal Reserve greater scope to focus on combating price pressures, particularly after the shock to oil prices caused by the US-Iran war reignited inflation concerns.

However, the latest jobs report may encourage policymakers to pay closer attention to the labor market, one of the Federal Reserve’s two core mandates, according to Bret Kenwell, US Investment Analyst at eToro.

“The new Federal Reserve has adopted a hawkish tone on inflation, and a stronger labor market would have reinforced that stance,” Kenwell said. “But today’s report does not point to problems in the labor market, while at the same time cooling the narrative that had been building around continued labor-market strength.”

Federal Reserve Chairman Kevin Warsh said on Wednesday that inflation risks had eased, while reiterating the central bank’s commitment to achieving its 2% inflation target.

Even so, ongoing uncertainty surrounding the Strait of Hormuz remains a source of risk, particularly if hostilities in the Middle East resume.

The United States and Iran concluded another round of indirect talks on Wednesday without any clear signs of progress toward a lasting peace agreement.

At the same time, uncertainty over the interest-rate outlook comes at a sensitive stage for artificial intelligence-related stocks, as investors debate whether companies benefiting from the AI boom, particularly semiconductor manufacturers, still have room for further gains.

The Philadelphia Semiconductor Index was little changed during Thursday’s session, while 10 of the 11 sectors within the S&P 500 traded higher, led by materials and consumer staples.

“We currently see plenty of value opportunities outside AI-related stocks and prefer the broader equity market,” Ielpo said.

In individual stock moves, Bending Spoons fell 3.9%, one day after shares of Vimeo, which is owned by the company, surged about 40% in their Nasdaq debut.

Market breadth remained positive, with advancing stocks outnumbering decliners by a ratio of 3.85-to-1 on the New York Stock Exchange and 2.48-to-1 on the Nasdaq.

Neither the S&P 500 nor the Nasdaq Composite recorded any new 52-week highs or lows.