NEW YORK (`) — Wall Street capped its worst week since Halloween with a lackluster Friday after reports showed workers were getting bigger raises, but key parts of the economy still don't appear to be overheating.
The S&P 500 rose 8.56 points, or 0.2%, to 4,697.24 after swinging between small gains and losses throughout the day. That capped the index's first down week in the past 10 years, having entered 2024 on hopes that inflation and the overall economy would cool enough for the Federal Reserve to cut interest rates significantly later in the year can.
The Dow Jones Industrial Average rose 25.77, or 0.1%, to 37,466.11, moving closer to its record set earlier in the week. The Nasdaq composite rose 13.77, or 0.1%, to 14,524.07.
Treasury yields in the bond market fluctuated wildly following the economic reports. They initially rose after the latest monthly jobs report showed US employers unexpectedly accelerated their hiring Last month. Average hourly wages for workers also rose, while economists had predicted a decline.
Such strong numbers are good news for workers and should keep the economy going. This has a positive impact on corporate profits, which are one of the main factors that determine stock prices.
But Wall Street is worried that the strong data could also be convincing Federal Reserve Upward pressure on inflation remains. That, in turn, could mean that the Fed will keep interest rates high for longer than expected. Interest rates impact the other major factor that determines stock prices, with high interest rates hurting financial markets.
The jobs report briefly forced traders to delay their forecasts on when the Fed might begin cutting interest rates. However, a report later in the morning showed that growth at financial, real estate and other companies in the U.S. services industry slowed more than economists had expected last month.
Following this report, traders quickly returned to expectations that the Fed would begin cutting interest rates in March. According to CME Group data, they now predict a nearly two in three chance, similar to the day before.
Overall, the data could bolster Wall Street's hopes for a perfect landing for the economy, with high interest rates slowing it just enough to curb high inflation, but not enough to trigger a recession.
After rising to as high as 4.09% immediately following the release of the jobs report, the 10-year Treasury yield fell back to 3.96% following the weaker-than-expected services industry report. The reading eventually fell to 4.04%, compared to 4.00% late Thursday.
On Wall Street, Constellation Brands rose 2.1% after the U.S. seller of Corona and Modelo beers reported higher-than-analysts-expected profits for its latest quarter.
Travel companies also showed strength and were able to further make up for their losses from the beginning of the week. Carnival rose 2.8% and American Airlines rose 3.9%.
On the losing side was Apple, whose 0.4% decline on Friday led to a weekly loss of 5.9%, its worst since September. That's a significant turnaround from last year, when the market's most influential stock gained more than 48%.
The broad decline in stocks this week came as no surprise to many on Wall Street, who had described the big rally since the fall as overblown. Critics say the six rate cuts traders are betting on in 2024 are unlikely unless there is a recession. The Fed itself suggested in its latest Summary of Economic Outlook (SEP) that three rate cuts were more likely.
“Many who expect the Fed to move faster and more aggressively than its SEP forecasts or recent statements may have experienced a dose of reality this week,” said Rick Rieder, chief investment officer of global fixed income at BlackRock. “The situation is cooling down, but more moderately than in the past, similar to the weather today. Some areas are experiencing bouts of rapid cooling, but in general there is nothing that should cause people to panic or aggressively shelter in place.”
In overseas stock markets, indices were mostly lower in Europe after data showed inflation rose to 2.9% in December. The rebound after seven monthly declines sparked debate over when the European Central Bank might soon cut its own interest rates.
Indices were also lower in large parts of Asia. An exception was Japan's Nikkei 225, which gained 0.3%.
Japanese exporters are expecting a boost from the falling value of the yen against other currencies. The yen weakened in recent days amid speculation that the Bank of Japan could slowly reverse its ultra-aggressive interest rate policy after Monday Severe earthquake in central Japan.
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` business reporters Yuri Kageyama and Matt Ott contributed.
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