Wall Street on Friday notched a new intraday all-time high, while U.S. Treasurys rallied, as traders returned from a mid-week holiday to receive a nonfarm payrolls report that further supported the case for Federal Reserve interest rate cuts.
Markets were shut on Thursday due to Independence Day.
The benchmark S&P 500 (SP500) had gained 0.29% to 5,553.05 points in midday trade, while the tech-heavy Nasdaq Composite (COMP:IND) had advanced 0.75% to 18,325.49 points. The blue-chip Dow (DJI) was under some pressure, last down 0.19% at 39,234.47 points.
Of the 11 S&P sectors, seven were in the green.
Before the opening bell, the U.S. Bureau of Labor Statistics said jobs growth slowed in June, while also revising lower the number for May. Additionally, the unemployment rate ticked up to 4.1% from 4.0%. Also see: jobs data in charts.
“Nonfarm payrolls gains were solid in June, rising 206K, but the underlying details of today’s employment report clearly signal that the U.S. labor market is softening on trend. Downward revisions to job growth in previous months and another tick higher in the unemployment rate add to the growing list of evidence that the excess heat in the labor market has been removed,” Wells Fargo’s Sarah House said.
A highly resilient labor market, along with inflation, has been one of the main reasons why the Fed has held interest rates steady and has been hesitant to start easing monetary policy.
“It’s time for the Federal Reserve to cut interest rates. That’s the message in today’s jobs report for June. Unemployment while still low is steadily notching higher. Job and wage growth while still strong are steadily moderating. The Fed has met its full employment mandate,” Mark Zandi, chief economist at Moody’s Analytics, said on X (formerly Twitter).
“This comes after last week’s stellar report on inflation which indicates the Fed’s inflation target is in clear view. Harmonized inflation is firmly below target. Hard to justify a restrictive 5.5% federal funds rate,” Zandi added.
Market participants responded to the nonfarm payrolls report by slightly raising their expectations for a 25 basis point interest rate cut by the Fed in September. According to the CME FedWatch tool, those odds are now around 75% compared to about 68% a day ago.
“The June jobs report will make the July Fed meeting more interesting because there may be – for the first time all year – a real debate over whether to cut at the *next* meeting (in September),” the Wall Street Journal’s Fed watcher Nick Timiraos said on X.
Turning to the fixed-income markets, U.S. Treasury yields fell as bonds were snapped up. The longer-end 30-year yield (US30Y) was down 5 basis points to 4.48%, while the 10-year yield (US10Y) was down 9 basis points to 4.29%. The shorter-end, more rate-sensitive 2-year yield (US2Y) was down 11 basis points to 4.62%.
See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.
Turning to active stocks, Macy’s (M) soared nearly 10% after an investor group led by Arkhouse Management and Brigade Capital upped their offer for the department store chain to about $6.9B.
Headlines from across the Atlantic also grabbed some attention earlier in the day. General elections in the UK ended with a landslide victory for the Labour Party, bringing an end to 14 years of Conservative rule. The British pound was up 0.4% against the dollar at $1.2806 (GBP:USD).