Stocks were rising on Friday. The surprisingly strong jobs report pointed to a more aggressive Federal Reserve, but Amazon’s gain helped power the Nasdaq Composite and S&P 500 higher.
January saw 467,000 jobs added, above the expected 150,000 and higher than the 199,000 added in December. The unemployment rate didn’t change much, at 4%. Wages rose about 0.7%. The results were particularly surprising given Wednesday’s ADP report, which predicted a loss of 200,000 jobs, and chatter from the Biden administration that suggested it would be a weak release.
The report might have been too strong, if the jobs and wage gains are seen as inflationary. That could mean that the Federal Reserve will raise interest rates by 50 basis points in March, higher than the current expectation of 25 basis points. If the Fed hikes rates more than expected this year, it could choke off economic growth.
The jobs report “cements 25 basis points in March and adds to the case for 50 basis points,” wrote Ian Lyngen, head of U.S. rates strategy at BMO.
The bond market agrees. The 2-year Treasury yield was up to 1.32% from 1.22% just before the jobs report, while the 10-year Treasury yield rose to 1.93%, from 1.82%.
Oil prices, too, are likely pointing toward higher inflation as they continued their march ever higher. U.S. futures for West Texas Intermediate crude were up 2.3%, hovering just above $92 a barrel for the first time since 2014.
“Friday’s strong jobs report strengthens the Federal Reserve’s argument that the economy is strong enough to withstand tighter monetary policy this year,” wrote Julian Koski, chief investment officer at asset management firm New Age Alpha.
Higher rates and high inflation are generally not good for stocks, but the Nasdaq and S&P 500 had a savior:
(ticker: AMZN). The online retailer reported better-than-expected earnings and saw its stock gain 16%. That’s helping the Nasdaq and S&P 500, as those index’s movements are weighted by its components’ market capitalizations. Amazon’s unusually large market cap of $1.4 trillion—before accounting for its Friday gain—was about 6% of the Nasdaq’s total market value. Amazon is not a part of the Dow.
Other tech stocks began rising, too, helping the S&P 500.
Tech stocks have already been beaten down of late, with the Nasdaq still down 12% from its late November all-time high. Rising bond yields make future profits less valuable—and many tech companies are expecting a bulk of their profits to come many years in the future.
But many stocks in the S&P 500 weren’t seeing the gains seen in tech. The
Invesco S&P 500 Equal Weight
Exchange-Traded Fund (RSP), which weights each stock in the index equally and therefore shows the movement of the average stock, was up 0.2%.
And the more economically sensitive sectors—consumer discretionary, industrials and materials—were all seeing losses.
Although markets were indicating that the Fed could act aggressively, there is a flip side. A 50 basis point rate hike in March is far from certain, even with Friday’s strong jobs report. “Does this change anything for the Fed? Probably not,” wrote Thomas Simons, economist at Jefferies. “The upside surprise [for jobs] doesn’t mean that they [the Fed] will accelerate their timelines for policy tightening by much.”
fell 0.2%. In Hong Kong, traders returned for the first time since Monday after the Lunar New Year holiday. The
Hang Seng Index
jumped 3.2%—the biggest one-day rise after the holiday in more than a decade.
Here are six stocks on the move Friday:
(PINS) shot up 61% and 10%, respectively; Snap had fallen almost 24% Thursday with Pinterest down more than 10%. The stocks, which are heavily reliant on advertising, were battered by Meta’s results, but they bounced back after posting their own earnings late Thursday that showed they weren’t dogged by the same problems.
(FB) was up 0.9%, after Thursday’s historic loss of market capitalization.
(CLX) was down 14% after the maker of cleaning products reported disappointing earnings and said margins would be squeezed by continuing cost pressures. The company posted an adjusted profit of 66 cents a share, below estimates of 84 cents a share.