Highlights
Equities held up pretty well Friday in the face of surging bond yields after a surprisingly strong US employment report. Most stocks weakened but declines in the major averages were limited.
The Dow Jones industrial average and the Nasdaq both declined by 0.2 percent while the S&P 500 eased 0.1 percent. Bond yields bounced up, with the 10-year note yield up 14 basis points on the day, but still ended slightly lower on the week. The dollar dropped and oil prices slipped.
Markets were wrong-footed by news that nonfarm payrolls jumped by 272,000, well above the 180,000 expected, and hourly earnings rose by 4.1 percent on year, beating estimates for 3.9 percent. The upbeat jobs news came after a week of softer than expected indicators built up expectations for U.S. rate cuts as early as July. Now the market sees only even odds of a rate move in September. Most are betting on November but with less confidence.
Equities appeared vulnerable to consolidative pressures after their rally to record highs this week but proved resilient Friday. Markets have been inspired by the start of the easing cycle in Europe and Canada and still expect the Federal Reserve to follow. Bullish talking points include a hoped-for boom in productivity as companies deploy artificial intelligence.
Among sectors, big technology shares, especially chipmakers that have led the recent rally, came under pressure Friday. Other weak links included homebuilders, industrial metals, telecoms, consumer staples, restaurant chains, managed care, and meme stocks. Holding up relatively well were big banks, credit cards, pharma, insurance, casinos and chain stores.
The Dow Jones industrial average and the Nasdaq both declined by 0.2 percent while the S&P 500 eased 0.1 percent. Bond yields bounced up, with the 10-year note yield up 14 basis points on the day, but still ended slightly lower on the week. The dollar dropped and oil prices slipped.
Markets were wrong-footed by news that nonfarm payrolls jumped by 272,000, well above the 180,000 expected, and hourly earnings rose by 4.1 percent on year, beating estimates for 3.9 percent. The upbeat jobs news came after a week of softer than expected indicators built up expectations for U.S. rate cuts as early as July. Now the market sees only even odds of a rate move in September. Most are betting on November but with less confidence.
Equities appeared vulnerable to consolidative pressures after their rally to record highs this week but proved resilient Friday. Markets have been inspired by the start of the easing cycle in Europe and Canada and still expect the Federal Reserve to follow. Bullish talking points include a hoped-for boom in productivity as companies deploy artificial intelligence.
Among sectors, big technology shares, especially chipmakers that have led the recent rally, came under pressure Friday. Other weak links included homebuilders, industrial metals, telecoms, consumer staples, restaurant chains, managed care, and meme stocks. Holding up relatively well were big banks, credit cards, pharma, insurance, casinos and chain stores.
Definition
Market Reflections track market reaction to the trading day's major events. Economic data, policymaker speeches, and company news are featured in this report as well as key indexes and financial instruments.
Description
Understanding why markets respond as they do is fundamental for an investor. Market Reflections help explain how the day's events, news, and data impact the outlook for the economy and for market prices.
