The Dow and the S&P 500 struggled for direction on Friday as investors assessed mixed payrolls data for cues on the Federal Reserve’s pace of policy easing, while gains in megacap tech stocks lifted the Nasdaq.
Futures initially rose after the U.S. Labor Department’s closely watched report showed the unemployment rate ticked higher to 4.1% in June, compared with expectations of it remaining unchanged at 4%.
However, the headline non-farm payrolls number rose by 206,000 jobs in June, higher than the expected 190,000 increase. Numbers for May were also revised sharply lower to 218,000 from 272,000.
Average hourly earnings rose 0.3%, as expected, and lower than the 0.4% rise in May.
“It’s a relatively benign report. The market was generally expecting the job gains to be a little bit lower, but the number was lower than May’s report that had really worried some people,” said Emily Bowersock Hill, CEO of Bowersock Capital Partners.
“If you’re the Fed, you’re saying - what happened in May is not quite as hot as we thought. The data isn’t bad enough to alarm markets, and not bad enough to worry the Fed.”
Treasury yields slipped after the data, lifting rate-sensitive megacap stocks such as Apple, Amazon.com and Meta Platforms which were up between 0.7% and 2.2%.
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Alphabet’s shares rose 1.6% to a record high. Utilities and consumer discrectionary stocks led sectoral gains, while the energy sector led declines.
Chances of a 25-basis point September interest rate cut stood at about 75% after the payrolls data, according to LSEG, with traders holding bets steady on about two cuts this year.
Tesla reversed early gains, pulling back 0.6% after hitting its highest level since early January on Wednesday.
Other data this week pointed to the U.S. economy losing steam, prompting market participants to strengthen their bets for multiple rate cuts this year.
That helped the S&P 500 and the Nasdaq notch record closing highs during Wednesday’s holiday-shortened trading. With the equity market also staying shut for U.S. Independence Day on Thursday, trading volumes have been light throughout the week.
At 9:50 a.m. ET, the Dow Jones Industrial Average was down 33.29 points, or 0.08%, at 39,274.71, the S&P 500 was up 0.80 points, or 0.01%, at 5,537.82, and the Nasdaq Composite was up 41.80 points, or 0.23%, at 18,230.10.
All the three major Wall Street indexes remain on course for weekly gains. With second-quarter earnings on the horizon, it remains to be seen whether Wall Street’s rally will broaden beyond major megacap stocks and whether earnings for those companies can continue to support steep valuations.
Macy’s jumped 10% after a report said Arkhouse Management and Brigade Capital raised their bid to buy the department store chain for about $6.9 billion.
Declining issues outnumbered advancers for a 1.55-to-1 ratio on the NYSE and a 1.51-to-1 ratio on the Nasdaq.
The S&P index recorded 12 new 52-week highs and six new lows, while the Nasdaq recorded 18 new highs and 54 new lows.
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