The S&P 500 hit fresh heights Friday as US indices rallied on tech earnings, even as red-hot US jobs data sent the dollar and bond yields up as chances of an early interest rate cut faded.
The US labor market smashed expectations last month in a surprise hiring pick-up, adding 353,000 jobs in January while the Department of Labor revised December’s figure sharply higher.
The unemployment rate held steady at 3.7 percent for a third straight month.
“If March wasn’t off the table as far as rate cuts were concerned before today’s payroll numbers, it’s not even in the same room now,” said CMC Markets analyst Michael Hewson.
US Federal Reserve boss Jerome Powell earlier this week dampened expectations of a March cut to interest rates, and strong job creation figures and wage gains are likely to give policymakers additional pause.
“The data exemplifies the concerns about inflation that we heard from the Fed,” said Kathleen Brooks, research director at XTB.
“This data is too strong for the Fed, and it could lead to a further recalibration of market-based interest rate expectations,” she added.
The prospect of higher interest rates for longer sent US bond yields and the dollar climbing.
But a robust labor market is positive in another sense.
“That said this wasn’t bad news for US markets given that the prospect of a recession looks even further away than ever,” added CMC Markets’ Hewson.
A resilient US economy should also mean that company earnings hold up, he said.
– Meta and Amazon shine –
Meanwhile, Wall Street indices closed firmly in the green, with the Dow climbing 0.4 percent while the tech-heavy Nasdaq surged 1.7 percent.
Their performance was buoyed by tech stocks and the silver lining of hiring data pointing to the US economy avoiding a recession.
Investors are focused on “good earnings out of Meta, Amazon and just the excitement around the artificial intelligence and technology companies,” said Tom Cahill of Ventura Wealth Management.
On Thursday, Meta and Amazon blew through expectations in their latest quarterly results.
Shares in Meta closed more than 20 percent up after the tech titan behind Facebook and Instagram reported a profit of $14 billion in the final three months of last year, beating analyst forecasts as revenue climbed to $40.1 billion.
Amazon also impressed with sales up to a more-than-expected $170 billion in the last quarter of 2023, after a record-beating holiday season. Its shares finished 7.9 percent up.
But iPhone maker Apple, which reported earnings after the bell on Thursday too, slipped 0.5 percent.
Even as it logged sales growth in the final months last year, worries about competition in the China market cast a pall on the news.
European equities ended mixed, with Frankfurt’s DAX setting a new intraday record of 17,004.55 points.
On the downside in Asia, Shanghai and Hong Kong fell, with traders still concerned about China’s economy and the lack of strong measures to provide stimulus.
The property sector is in focus, especially after the liquidation by a Hong Kong court this week of troubled developer Evergrande.
Analysts also pointed to traders selling before the Lunar New Year break.
Oil prices fell amid concerns about demand.
“Talk of a possible ceasefire between Hamas and Israel is also weighing on prices,” noted Hewson.
– Key figures around 2130 GMT –
New York – Dow: UP 0.4 percent at 38,654.42 (close)
New York – S&P 500: UP 1.1 percent at 4,958.61 (close)
New York – Nasdaq: UP 1.7 percent at 15,628.95 (close)
London – FTSE 100: DOWN less than 0.1 percent at 7,615.54 (close)
Paris – CAC 40: UP less than 0.1 percent at 7,592.26 (close)
Frankfurt – DAX: UP 0.4 percent at 16,918.21 (close)
EURO STOXX 50: UP 0.3 percent at 4,654.55 (close)
Tokyo – Nikkei 225: UP 0.4 percent at 36,158.02 (close)
Hong Kong – Hang Seng Index: DOWN 0.2 percent at 15,533.56 (close)
Shanghai – Composite: DOWN 1.5 percent at 2,730.15 (close)
Euro/dollar: DOWN at $1.0794 from $1.0874 on Thursday
Dollar/yen: UP at 148.30 yen from 146.42 yen
Pound/dollar: DOWN at $1.2639 from $1.2746
Euro/pound: UP at 85.38 pence from 85.29 pence
West Texas Intermediate: DOWN 2.1 percent at $72.28 per barrel
Brent North Sea Crude: DOWN 1.7 percent at $77.33 per barrel
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