US stocks experienced a significant increase on Friday morning following a report showing a slowdown in job growth in the US. The Dow was up 1.2%, the S&P 500 gained 1.1%, and the Nasdaq increased by 1.8%. The Bureau of Labor Statistics data revealed that only 175,000 new jobs were added in April, falling short of economists’ expectations of 235,000 jobs and the 315,000 jobs added in March. The unemployment rate also rose to 3.9% from 3.8% in the previous month.
While the slower job growth is concerning for the overall economy, Wall Street reacted positively to the news. The Federal Reserve has been hiking interest rates to slow down the economy and prevent inflation. A strong job market allows the central bank to maintain elevated interest rates without causing a recession. However, if the labor market weakens, the Fed may consider cutting rates. The employment data from Friday was seen as a relief for markets as it suggested that inflation may not be as severe as feared and could potentially lead to a disinflation trend.
Investors have started anticipating more interest rate cuts by the Federal Reserve later this year. The expectation of at least one rate cut after the central bank’s September meeting has increased to nearly 75%, up from about 62% previously. Treasury yields also dropped following the employment data, with the 10-year yield falling below 4.5%. The inverse relationship between Treasury yields and prices indicated a shift in market sentiment towards potential rate cuts.
Federal Reserve Chair Jerome Powell mentioned during a press conference after the recent policy decision that the central bank is prepared to act in response to unexpected changes in the labor market. The possibility of a sudden drop in employment could prompt the Fed to consider further monetary policy adjustments. In company earnings news, Apple saw a 7.5% increase in its shares after reporting strong earnings for the first quarter of 2024. The tech giant also projected beating sales estimates for the year, contributing to the positive market sentiment.
The situation is still evolving, and more updates are expected as new information becomes available. The reaction of markets to the latest employment data and the anticipation of potential interest rate cuts by the Federal Reserve will continue to shape investor sentiment in the coming days. The ongoing uncertainty surrounding the economy and inflation dynamics will likely impact future monetary policy decisions and market performance. Stay tuned for further developments in this rapidly changing landscape.
