- Nasdaq posts best weekly winning streak since January 2020
- Data shows the unemployment rate was 3.7% in May; Wage growth is moderate
- Amazon reports on its talks about low-cost cellular services
- Materials lead to gains in S&P sector, Nvidia slips again
June 2 (Reuters) – US stocks closed higher on Friday after a jobs report showing moderate wage growth in May suggested the Federal Reserve might forego a rate hike in two weeks time while investors negotiated a deal in welcomed Washington, which averted a catastrophic debt default.
The tech-heavy Nasdaq Index (.IXIC) surged to a 13-month intraday high and posted its sixth straight week of gains that marked its best winning streak since January 2020.
US job growth accelerated in May, but the jobless rate rose to a seven-month high of 3.7% as more jobseekers indicated labor market conditions were easing, the Labor Department said.
The rise in the unemployment rate from a 53-year low of 3.4% in April reflected a decline in household employment and a rise in the overall labor force. A larger labor pool reduces pressure on firms to raise wages and helps slow inflation.
“Although the actual number of employees appears to be a hot number, the wage rate is not increasing anytime soon,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh. “It’s a softening effect and is that the mythical soft landing? Looks like.”
The data brought some relief to investors, most of whom expect the Fed to hold interest rate hikes at its June 13-14 policy meeting. It would be the first stop since the Fed began aggressively tightening its anti-inflation policy more than a year ago.
However, some pointed out that the significantly better-than-expected jobs data is a sign that the Fed has still not contained inflation.
“Our view is and remains that the market is completely wrong in its assessment of what the Federal Reserve is doing,” said Phil Orlando, chief equity strategist at Federated Hermes in New York.
“The market is anticipating that the economy would cool, inflation would collapse and the Fed would turn around and start cutting rates. That’s wrong.”
Fed fund futures showed a 71.3% chance the Fed will hold rates two weeks from now, up from 79.6% on Thursday, according to CME Group’s FedWatch tool.
Markets are now awaiting data on key consumer prices a day ahead of the Fed’s interest rate decision in two weeks.
Reuters Graphics Reuters GraphicsTraders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 30, 2023. REUTERS/Brendan McDermid
The Senate late Thursday passed a bill raising the government’s $31.4 trillion debt ceiling and averting a catastrophic first-ever default.
The passage of the vote eased investor concerns as Wall Street’s fear indicator, the CBOE Volatility Index (.VIX), fell to its lowest level since November 2021, falling 1.1 points to 14.6 points.
The Dow Jones Industrial Average (.DJI) was up 701.19 points, or 2.12%, to 33,762.76, the S&P 500 (.SPX) was up 61.35 points, or 1.45%, to 4,282.37 and the Nasdaq Composite (.IXIC) was up 139.78 points, up 1.07% at 13,240.77.
For the week, the S&P 500 is up 1.82%, the Dow is up 2.02% and the Nasdaq is up 2.04%.
Volume on US exchanges was 11.05 billion shares, compared to about 10.58 billion average for the entire session over the last 20 trading days.
Verizon Communications Inc (VZ.N), AT&T Inc (TN) and T-Mobile US Inc (TMUS.O) shares fell after a report said Amazon.com Inc (AMZN.O) was in talks with the US -Telecoms company offers low-cost cellular services to its Prime members.
Verizon slipped 3.2%, while AT&T and T-Mobile declined 3.8% and 5.6%, respectively; Amazon gained 1.2%.
All 11 S&P 500 sectors rose, with the Materials Index (.SPLRCM) leading the way, up 3.4%, and the Consumer Discretionary (.SPLRCD) sector, in which Amazon sits, just behind with one plus of 2.2%.
Nvidia Corp (NVDA.O) slipped 1.1% for a second day with declines after the company briefly entered the elite club of mega-cap stocks valued at $1 trillion or more on Wednesday, in hoping that artificial intelligence will deliver significant returns in the future.
But Nvidia’s nearly 170% surge year to date makes it clear to investors that the market is being dominated by the outperformance of the mega-corporations while most other companies are lagging behind.
“No one has really explained to me how they’re going to make money from this,” said Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management in Punta Gorda, Fla. “A company like Nvidia, which is growing so much in such a short time, makes no rational sense.”
On the NYSE, rising issues outpaced falling ones by a ratio of 4.75 to 1; On the Nasdaq, a 2.73-to-1 ratio favored the movers.
The S&P 500 posted 15 new 52-week highs and two new lows; The Nasdaq Composite posted 74 new highs and 40 new lows.
Reporting by Herbert Lash, additional reporting by Shreyashi Sanyal, Shristi Achar A and Shashwat Chauhan in Bengaluru; Edited by Nivedita Bhattacharjee and Maju Samuel
Our standards: The Thomson Reuters Trust Principles.
Shreyashi Sanyal
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