US Stocks Climb as Surprise Job Losses Support a September Fed Pause

The S&P 500 rose Friday after a sharp decline in US payrolls reduced expectations for a September interest rate hike. Technology and software stocks led the gains, while Treasury yields fell after the report.

The index also moved toward a second straight weekly gain after reaching a record earlier in the week. Traders now face July inflation data, which could influence the Federal Reserve’s next policy decision.

S&P 500 Gains After Weak Payroll Data

The S&P 500 climbed 0.6%, while the NASDAQ Composite gained 1.1%. Meanwhile, the Dow Jones Industrial Average added around 140 points, representing a 0.3% increase.

US employers cut 23,000 jobs during July, according to the Labor Department. Economists polled by Dow Jones expected an increase of 83,000 jobs. A Reuters poll projected an 80,000 gain.

The unemployment rate fell from 4.2% to 4.1%. However, the labor force participation rate reached its lowest level in more than five years. Revised data also removed a combined 103,000 jobs from May and June payroll figures.

The report reduced expectations that the Federal Reserve will raise rates at its September meeting. LSEG data placed the probability of an increase near 20%, down from 55% before the payroll release.

Fed Rate Outlook Shifts Toward a Pause

Fed funds futures traders now largely expect policymakers to hold rates within the current 3.50% to 3.75% range. The central bank kept rates unchanged during its July meeting.

Under Chair Kevin Warsh, the Fed has offered limited guidance about its next policy move. Investors have therefore focused closely on labor, inflation and wage data.

Anthony Saglimbene, Ameriprise Financial’s chief market strategist, said the report gave policymakers more time. “Even with a negative job print, the job market remains healthy. But it gives the Fed some room to pause in September,” he said.

Meanwhile, former Dallas Fed Chair Richard Fisher said he did not view the report as entirely weak. He noted that wage growth had slowed and could affect consumer spending. Fisher also said he did not support raising rates now.

Technology Stocks Lead Wall Street Rally

Software and semiconductor shares provided much of Friday’s market support. Atlassian surged more than 30% after its quarterly profit and revenue exceeded estimates. The company also issued a stronger financial forecast.

Moreover, Cloudflare gained after raising its annual revenue outlook above market estimates. Microchip Technology advanced after forecasting quarterly revenue above expectations. NVIDIA and Broadcom also recorded gains during the session.

The Philadelphia Semiconductor Index rose more than 2%, while the S&P 500 software and services index gained around 1.3%. The iShares Semiconductor ETF increased nearly 7% during the week.

Meanwhile, Airbnb climbed about 14% after reporting stronger quarterly profit and revenue. The company also raised its full-year revenue and margin guidance. Its shares reached their highest level in four years.

By contrast, Trade Desk dropped nearly 25%. The advertising technology company issued a third-quarter revenue forecast below analysts’ expectations.

Inflation Data Becomes the Next Market Test

The S&P 500 has gained more than 3% this week. The NASDAQ has risen around 5%, placing it on course for its strongest weekly performance since May. The Dow has also added about 3%.

Corporate earnings have supported the recovery. More than 400 S&P 500 companies have reported quarterly results. Over 85% have exceeded analysts’ estimates, according to LSEG data.

Investors will now monitor the July consumer price index report on Wednesday. Economists expect annual headline inflation of 3.4% and core inflation of 2.5%. Producer price data will follow on Thursday.

Retail sales figures will arrive Friday and offer another measure of household spending. Applied Materials, Cisco and CoreWeave will also report earnings during the week.

Treasury yields declined after the payroll release. The 10-year yield slipped to 4.65%, while the two-year yield fell to 4.20%. Both later recovered part of their initial declines.

Oil prices rose about 1% as investors monitored US-Iran talks concerning the Strait of Hormuz. Brent crude traded near $83 per barrel, while West Texas Intermediate held around $78. Oil movements remain central to inflation expectations and future Fed decisions.

Weaker US jobs data boosted hopes of a Federal Reserve pause, lifting Wall Street and supporting gains in technology stocks. Investors will now watch upcoming inflation and retail sales data for further clues on the direction of interest rates.

Also Read: Stock Market Update: Nifty 50 Opens 25 points Lower, Sensex Holds Around 76,830 Amid Mixed Global Cues