S&P 500 hits record 7,757 as jobs report eases rate-hike fears

The S&P 500 rose 0.6% to a record 7,757.64 on Friday after a July jobs report showed employers cut 23,000 positions, easing pressure on the Federal Reserve to raise interest rates.

"The weak payrolls print may ease the pressure on the Fed to raise rates at its September meeting, but next week's inflation data will still likely be the deciding factor," said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management.

The Dow Jones Industrial Average added 151.83 points, or 0.3%, to 54,036.93, just short of the record it set Wednesday. The Nasdaq Composite climbed 342.26 points, or 1.3%, to 26,690.62. Technology shares did much of the heavy lifting, with Nvidia up 2.3% and Broadcom up 1.7%. The benchmark S&P 500 and the Nasdaq each capped their best weekly gain since April, extending a strong start to August after several weak months.

The jobs report also revised June and May payrolls down by a combined 103,000 jobs, painting a dimmer picture of a labor market that had been one of the economy's brighter spots. The bond market reacted more strongly to the weaker signal. The yield on the 10-year Treasury fell to 4.64% from 4.67% before the release, while the two-year yield, which tracks Fed expectations more closely, slipped to 4.20% from 4.22%.

Wall Street now prices a 42% chance of a rate cut at the Fed's September meeting, down from 55% on Thursday and 67% a week ago, according to CME FedWatch. A weaker jobs market complicates the Fed's balancing act between supporting employment and fighting inflation, which has run stubbornly above 3% for most of the year.

Corporate earnings have helped offset those concerns. Nearly 90% of companies in the S&P 500 have reported second-quarter results, with analysts expecting profit growth of about 50% — the strongest since 2021. Airbnb jumped 17.4% after the vacation-rental company beat profit and revenue estimates late Thursday.

Oil prices gained ground, with Brent crude rising 1.3% to $83.55 a barrel, though prices remain well below the $113 peak reached during the five-month U.S. war with Iran. The U.S. and Iran have both said they are working on deals that could reopen the Strait of Hormuz, where a fifth of the world's oil and natural gas once passed.

"Although the stock market is likely to welcome the dovish implications of the report, investors should be wary of the future growth potential of an economy where fewer people are working," said Peter Graf, chief investment officer at Amova Asset Management Americas.

Next week brings the consumer price index, expected to show July inflation rose at a 3.4% rate, a slight easing from the 3.5% rise in June. That reading will likely determine whether the Fed holds rates steady in September or moves to cut, and with it the direction of the record-setting rally.

This article is for informational purposes only and does not constitute investment advice.