The recent softening of U.S. job growth in April has fueled speculation about the Federal Reserve cutting interest rates later this year. The annual wage growth has also dipped below 4% for the first time in nearly three years, while the unemployment rate exceeded estimates. These factors have led traders to increase their bets on a potential interest rate cut by the Fed in September. David Russell, global head of market strategy at TradeStation, mentioned that worries about wage pressures have been weighing on the market but the latest job report has somewhat alleviated those concerns.
Following the release of the job report, all three major Wall Street indexes were on track for weekly gains. Yields on government bonds fell, with the yield on the 10-year note reaching 4.509%. The CBOE Volatility Index, also known as the “fear gauge,” dropped to its lowest level in a month. The market's positive reaction to the data was further fueled by the Fed's dovish interest rate guidance in its recent policy meeting.
Among the notable stock movements, Apple surged 6.7% after announcing a $110 billion share buyback program and surpassing expectations for quarterly results. The information technology sector led the gains, rising by 3%. Amgen also saw a significant increase of 13.1% as the biotechnology firm hinted at positive data from a mid-stage study of its experimental weight-loss drug, MariTide.
As of midday on Friday, the Dow Jones Industrial Average was up by 1.13%, the S&P 500 gained 1.10%, and the Nasdaq Composite surged by 1.90%. However, not all companies experienced positive movements. Expedia dropped by 14.1% after reducing its full-year revenue growth forecast due to a decline in gross bookings on its vacation rental platform. Despite this, a majority of companies in the S&P 500 beat analysts' expectations for the first quarter earnings, with 76.8% exceeding estimates.
Market Outlook and Trends
Looking ahead, investors are closely monitoring economic indicators and policymakers' statements for signals regarding future interest rate decisions. Fed Governor Michelle Bowman emphasized that inflation is expected to continue declining even as the Fed maintains current interest rate levels. The overall market sentiment remains optimistic, with advancing issues outnumbering decliners on both the NYSE and Nasdaq exchanges. The S&P 500 posted new 52-week highs, indicating a positive market trend.
The recent job report has sparked hope for potential interest rate cuts by the Federal Reserve, leading to an overall positive market performance for the week. Investors are optimistic about the future outlook, with key companies exceeding earnings expectations and sectors like technology and biotechnology driving market gains. Despite some challenges faced by individual companies, the broader market seems to be on a positive trajectory.