Stocks surged Friday, driving the Dow Jones industrial average to a fresh six-year high and to within 145 points of its all-time high, as moderating job growth reinforced Wall Street’s hopes that the Federal Reserve may soon end its rate hike campaign.
The government’s April employment report, released before Friday’s open, showed moderate employment growth and was taken by investors as the latest sign of a softening economy — a reason for the Fed to stop raising interest rates. That countered worries over rising wages, which followed an upswing in employers’ labor costs on Thursday.
Jack Caffrey, equities strategist for JPMorgan Private Bank, said the market appeared to be focusing on recent positive data instead of considering the long-term consequences of why the Fed would stop boosting interest rates — because economic growth has slowed enough to contain inflation.
“People are taking the weaker job creation, the stability in the unemployment rate and the up tick in jobless claims and spinning that into a hope the Fed will move to the sideline sooner than later,” Caffrey said. “It’s almost a hope-for-relief rally instead of a ‘the Fed is done, things are slowing down’ mentality.”
Falling crude oil prices earlier this week also helped the stock market to mount its gains, although they edged up again Friday, and some believe higher gasoline prices will pressure consumer spending and keep the economy from overheating.
The Dow Jones industrial average finished Friday up 138.88 points, or 1.21 percent, and at its best level since January 2000. The Dow is now just 145.54 points away from an all-time high, which the index set on Jan. 14, 2000, and at a fresh six-year high.
The broader Standard & Poor’s 500-stock index finished Friday up 13.51 points, or 1.03 percent, while the Nasdaq composite index added 18.67 points, or 0.80 percent.
The three stock indexes finished the week higher. The Dow rose 1.85 percent, the S&P climbed 1.16 percent and the Nasdaq rose 0.86 percent. The S&P is 13.2 percent away from its all-time high, while the Nasdaq composite is down 53.6 percent from its 2000 record.
Friday’s light trading volume was indicative of the market’s ongoing uncertainty about interest rates and whether stocks can push upward noted Christopher Piros, director of investment research for Prudential’s Strategic Investment Research Group. Meanwhile, the jobs data left the inflation riddle unanswered, he added.
“We are at a point where inflation expectations are still rising, and the Fed is faced with a dilemma of whether they’ve done enough to cap inflation, but not enough to roll over the economy,” Piros said. “I haven’t seen real signs of a pickup in core inflation, although it’s been ticking up slowly.”
The Labor Department said U.S. employers added 138,000 jobs in April, far less than estimates of a 200,000 gain. Average hourly earnings meanwhile jumped 0.5 percent, above the consensus target of 0.3 percent. The unemployment rate held steady at 4.7 percent.
Bonds recouped recent losses, with the yield on the 10-year Treasury note falling to 5.11 percent from 5.15 percent late Thursday. The U.S. dollar sank against the Japanese yen and was flat against European currencies, while gold prices topped $680 per ounce.
Crude oil futures edged up following a three-day decline spurred by government data showing improving supplies of gasoline and flat motor fuel demand. A barrel of light crude added 25 cents to settle at $70.19 on the New York Mercantile Exchange.
In company news, Warner Music Group Corp. reported a loss for the latest quarter amid declining revenue from its music publishing business. However, record music sales rose 9 percent, led by a threefold jump in digital sales. Warner Music’s stock rose 66 cents to $29.40.
Medco Health Solutions Inc. posted a 66 percent slide in first-quarter profit, hurt by a $100 million charge to settle three legal matters. Medco nonetheless rose $1.99 to $52.76.
Luxury homebuilder Toll Brothers Inc. rose $1.21 to $30.85 although its signed contracts tumbled 29 percent last quarter. The company also lowered its forecast for full-year home deliveries.
Japan’s markets were closed Friday for a national holiday. Britain’s FTSE 100 rose 0.91 percent, Germany’s DAX index surged 1.22 percent and France’s CAC-40 was higher by 1.01 percent.