US stocks climb as soft jobs report cools interest rate hike fears

US stock indexes advanced on Friday after a weaker-than-expected jobs report eased expectations for a near-term interest rate increase by the Federal Reserve. The Labor Department reported that nonfarm payrolls increased by 29,000 jobs last month, falling significantly below the 90,000 estimate from economists polled by Reuters, while data for the prior two months also saw sharp downward revisions.

Market Gains

The Nasdaq Composite led the gains by climbing 1.14 percent or 307.48 points to reach 27,179.15, hitting an intraday record high. The Dow Jones Industrial Average rose 0.43 percent or 217.14 points to close at 51,143.70, and the S&P 500 added 0.70 percent or 53.99 points to finish at 7,720.44. Megacap shares such as Nvidia and Tesla provided the biggest boosts to the S&P 500, with Tesla helping lift the consumer discretionary sector by over one percent. Meanwhile, the rate-sensitive S&P 500 real estate index rose 0.5 percent and the small-cap Russell 2000 index gained about one percent, marking its largest daily jump in a month.

Sector Declines

Not all sectors shared the positive momentum. Nike shares tumbled 4.5 percent after the sportswear company forecast a surprise steep drop in annual revenue due to weak demand in China, alongside plans for job cuts and business restructuring. Data storage providers also slumped following a report that Toshiba plans to double its hard disk production capacity, causing Western Digital to tumble about 10 percent and Seagate Technology to drop about 11 percent.

Weekly Trends

Market expectations for a rate hike of at least 25 basis points at the Federal Reserve's upcoming meeting fell to 23.8 percent according to CME FedWatch, down from 24.4 percent in the previous session and 64.2 percent a week earlier. Robert Bernstone, head of trading at SummitTX Capital in New York, noted that the news showed the economy was not roaring too fast to cause immediate alarm, though caution remained regarding overall inflation and economic health. Despite Friday's positive session, the Dow and S&P 500 remained on pace for four declines in the past five weeks, whereas the Nasdaq was headed for its fifth weekly gain in six weeks.

Context

Stock markets frequently react strongly to US employment and inflation numbers because these figures guide central bank monetary policy decisions on interest rates. When economic growth cools down as shown by low job creation, investors often anticipate that the Federal Reserve will pause or slow down rate hikes, which makes borrowing cheaper and encourages stock buying.