Stocks tied to the economic rebound rose stronger than expected on Friday’s job report, pushing two key market averages to all-time highs.
The Dow Jones Industrial Average rose 133 points, or 0.4%, to hit a record intraday high. The S&P 500 rose 0.2% to its own intraday all-time high, while the tech-heavy Nasdaq Composite fell 0.3%.
Friday’s job report showed that the U.S. economy created 943,000 jobs in July, according to the Department of Labor. Economists estimate that the economy created 845,000 jobs in the past month, according to Dow Jones estimates. The unemployment rate fell to 5.4%, which is below the estimate of 5.7%.
Bank stocks led gains after the report as interest rates skyrocketed and their profitability prospects improved. JPMorgan, Bank of America and Wells Fargo all gained more than 1% in early trading. Industrial, retail and energy stocks also rose as the job report allied concerns about the economic recovery.
On the other hand, technology stocks fell as the rise in interest rates led investors to take profits on the names and reinvest in stocks that could benefit more from faster economic growth. Amazon, Apple and Salesforce saw a slight decline in early trading. Higher interest rates can also result in high tech stock valuations.
Defensive stocks like utilities and healthcare companies also fell after the report.
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“I think these are really, really good numbers for the stock market. It’s just a number, they tend to be volatile, have to be used with caution. … And what it does most of all It is causing a huge shift in the way this stock market is run, “said James Paulsen, Leuthold Group’s chief investment strategist, in CNBC’s” Squawk Box “.
“The S&P isn’t doing much, but the pull here has shifted towards cyclical and small, maybe even to some extent international, markets that are more sensitive to the economy, and away from growth and defensive stocks that have been around for some time Lead time. ” here, “added Paulsen.
Friday’s report comes after the weekly number of initial filings reported Thursday hit 385,000, which was in line with expectations. However, Wednesday’s ADP private payroll report showed fewer jobs were created in July than expected.
Wall Street is closely monitoring Friday’s labor market report as it could affect future Federal Reserve policy. Fed Governor Christopher Waller told CNBC on Monday that he would campaign for the central bank to postpone its bond purchases if the next two job reports show a healthy rebound.
“This is a strong report. It will truly cement the view that the Fed is not far from announcing a tightening,” said James McCann, deputy chief economist of Aberdeen Standard Investments, in a statement. “Powell could use the central bank policymakers’ meeting in Jackson Hole later this month to provide further guidance, but he made it clear that these job reports are a cornerstone of the Fed’s deliberations on tightening policy.”
The job report also caused movement in the bond market. The 10-year government bond yield continued its recent volatile trade, rising to 1.28% according to the report. The benchmark yield was trading at 1.13% earlier this week. The returns move inversely to the prices.
A busy week of profits continued on Friday with several notable reports including from Canopy Growth, AMC Networks, Draftkings, Norwegian Cruise Line and Goodyear Tire. Also, Berkshire Hathaway is on deck for Saturday mornings.
Expedia shares fell more than 9% after the travel company’s earnings per share fell short of expectations in its quarterly report.
As of Thursday afternoon, 427 S&P 500 components had released quarterly results, with 88% beating earnings estimates, according to data from Refinitiv. In terms of sales, 87% exceeded expectations.
Stocks ended Thursday’s session in the green, the S&P 500 rising 0.6% to close on a new high. The Dow gained 271.58 points, or 0.78%. The Nasdaq Composite also rose 0.78% for its fourth consecutive positive session.
For the week, the Dow is up 0.4%. The S&P and the Nasdaq are up 0.77% and 1.5%, respectively.
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