Stocks close higher after monthly jobs report tops forecasts

Stocks ended higher Friday on the back of stronger-than-expected employment data.

The Dow gained 94 points, with McDonald’s contributing the most gains. The S&P 500 rose 0.64 percent, with information technology leading advancers. The Nasdaq outperformed, advancing more than 1 percent.

The U.S. economy added 222,000 jobs in June, the Labor Department said. Economists polled by Reuters expected an increase of 179,000. The unemployment rate ticked higher to 4.4 percent from 4.3 percent. Wage growth, which is viewed as a measure of inflation, rose by just 0.2 percent, however.

“This was a hot number,” said JJ Kinahan, chief market strategist at TD Ameritrade. But “the stock market’s reaction has been tempered by the wage-growth numbers.”

Investors paid attention for the wage growth data as the Federal Reserve is expected to raise interest rates once more this year. The central bank also intends to unwind its massive $4.5 trillion balance sheet.

Treasury yields pared earlier gains after the Labor Department’s release. The benchmark 10-year yield hovered around 2.38 percent. The two-year yield, which is the more sensitive to changes in monetary policy, traded near 1.395 percent.

“Nothing here is going to dissuade the Fed from its rate hiking cycle though,” said James Athey, senior investment manager at Aberdeen Asset Management. “With unemployment below 4.5 [percent], the jobs market is the least of the Fed’s worries. There’s a new hawkish mood that’s rippling through bond markets and causing a sell-off. Today won’t do much to halt that.”

The U.S. dollar whipsawed against a basket of currencies. It briefly traded lower before jumping 0.31 percent to 96.09.

Entering Friday’s session, the three major indexes were on track for weekly losses as tech stocks have fallen on the back of rising interest rates. Tech has been the best-performing sector this year, rising 15.6 percent. Sovereign bond yields have spiked around the world amid hawkish rhetoric from major central banks.

Heading into next week, investors will watch out for releases of major quarterly reports. Citigroup, Wells Fargo and JPMorgan Chase are all scheduled to report second-quarter results.

“Currently earnings are expected to grow 6.2 percent, but we wouldn’t be surprised to see growth of more than 9 percent,” said Lindsey Bell, investment strategist at CFRA. She also said tech earnings could be a pleasant surprise for investors.

“I wouldn’t count tech out just yet,” Bell said. “I think the reporting period will remind investors that the fundamentals are still there.”

Quarterly results helped lift the broader market in the previous quarter. S&P 500 earnings grew by more than 10 percent for the first quarter.

Fred Imbert

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