TOKYO – Stocks ended solidly higher and bond yields rose Friday as Wall Street welcomed a surprisingly strong U.S. jobs report.
The S&P 500 rose 1.1%, making up most of the loss from the previous day and moving closer to its record high set last week. The benchmark index still posted its first weekly loss in three weeks.
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The Dow Jones Industrial Average rose 0.8% and the Nasdaq composite gained 1.2%.
Technology companies accounted for a big share of the rally. Chipmaking giant Nvidia rose 2.4% and Google’s parent company, Alphabet, rose 1.3%.
The gains were broad, with every sector in the S&P 500 finishing in the green.
U.S. employers added a surprisingly strong 303,000 workers to their payrolls in March, according to a government report on Friday. The strong job market has helped fuel consumer spending and earnings growth for businesses, amounting to strong economic growth overall.
The robust job market has also sparked concerns about inflation creeping higher, which could delay any rate cuts by the Federal Reserve. However, Friday’s report showed that wages rose a modest 0.3% for the month, which puts less upward pressure on inflation, and Wall Street still expects the Fed to begin cutting rates in June.
Friday's gains followed a late-day slump in stocks on Thursday after a Fed official unsettled investors by questioning whether the central bank needs to cut rates at all this year amid a strong economy.
Treasury yields climbed following the jobs report. The yield on the 10-year Treasury rose to 4.40% from 4.31% just before the report was released. The two-year yield, which moves more on expectations for the Fed, rose to 4.75% from 4.65% just prior to the report.
The bond market may be signaling concern about interest rates staying higher for longer, but the stock market seems to be accepting the strong jobs report as good news, with consumer spending and corporate profits remaining important for investors.
“As long as the market gets one or two cuts and the Fed doesn't leave rates unchanged, that's good enough for equity investors,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
The Fed's benchmark interest rate remains at its highest level in two decades as a result of historic rate hikes meant to tame inflation. The strategy has seemingly worked so far, with overall consumer prices falling drastically from a peak in 2022. Inflation fell to a rate of 3.2% in February. It was as a high as 9.1% in the middle of 2022.
Strong employment and consumer spending have raised concerns about getting inflation below 3% and heading toward the Fed's target rate of 2% won't be easy. They also raise the potential for inflation to reheat.
The Fed and investors will get another key update on inflation next week when the government releases its March report on consumer prices.
Wall Street has a slightly better than even bet that the Fed will trim rates at its June meeting, according to CME's FedWatch Tool. That's down from 65.9% on Thursday and 72% a month ago.
All told, the S&P 500 rose 57.13 points to 5,204.34. The Dow added 307.06 points to 38,904.04, and the Nasdaq gained 199.44 points to 16,248.52.
The market was mostly quiet elsewhere with the latest round of corporate earnings set to heat up in the next few weeks.
Johnson & Johnson slipped 0.1% after the pharmaceutical giant said it was buying the medical technology company Shockwave in a deal worth about $13 billion.
Apple edged up 0.5% after announcing that it is laying off more than 600 workers in California, marking its first big wave of post-pandemic job cuts amid a broader wave of tech industry consolidation. Companies in the tech sector have been slashing their workforces for two years, but the actions have had little impact on the broader employment market.
In energy markets, the price of U.S. crude oil settled 0.4% higher. It's up just over 20% so far this year as demand remains robust.
Markets in Europe and Asia fell.
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AP Business Writers Yuri Kageyama and Matt Ott contributed to this report.