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S&P 500 and Nasdaq Hit Record Highs as Jobs Report Fuels Rate Cut Speculation

U.S. stocks soared to new heights on Friday, with the S&P 500 and Nasdaq closing at record levels. This surge was driven by a stronger-than-expected June jobs report, which has increased investor confidence that the Federal Reserve will cut interest rates in September. The Dow Jones Industrial Average also saw gains, albeit more modestly.

Key Takeaways

  • S&P 500 and Nasdaq Records: Both indices closed at all-time highs, with the S&P 500 rising 0.6% and the Nasdaq climbing 0.9%.
  • June Jobs Report: The U.S. economy added 206,000 jobs in June, surpassing Wall Street’s expectations of 190,000. However, the unemployment rate rose slightly to 4.1%.
  • Rate Cut Speculation: Investors are now pricing in a 75% chance of a rate cut in September, according to CME’s FedWatch tool.
  • Tech Giants Lead: Apple, Amazon, Alphabet, and Meta were among the top performers, each setting new records.
  • Treasury Yields: The 10-year Treasury yield fell to 4.27%, continuing its decline for the week.

Market Performance

The S&P 500 advanced around 0.6%, while the Dow Jones Industrial Average climbed 0.2%. The tech-heavy Nasdaq Composite increased by 0.9%, led by gains in major tech stocks like Apple, Amazon, Alphabet, and Meta. All three indices logged wins for the first trading week of the second half of the year.

Labor Market Insights

The June jobs report revealed that the U.S. economy added 206,000 jobs, exceeding the expected 190,000. However, the unemployment rate rose to 4.1%, its highest level since November 2021. This mixed data suggests that while job growth remains strong, the labor market is showing signs of cooling.

Rate Cut Expectations

Signs of looser conditions in the labor market have bolstered the idea that inflation will continue to ease, setting the stage for the Federal Reserve to lower interest rates from their current two-decade high. Traders are now pricing in a 75% chance of a rate cut in September, according to CME’s FedWatch tool.

Sector Highlights

  • Tech Sector: Apple, Amazon, Alphabet, and Meta were among the top performers, each setting new records. Tesla also saw significant gains, with shares surging more than 25% over the past week.
  • Cryptocurrency: Bitcoin’s value fell by more than 2%, continuing its losing streak and pulling down related stocks like Coinbase and Marathon.
  • Retail: Amazon gained over 1% following news of a merger between Saks Fifth Avenue and Neiman Marcus Group, in which Amazon will hold a minority stake.

Bond Market Reaction

The 10-year Treasury yield fell to 4.27%, continuing its decline for the week. This drop in yields is seen as a positive sign for stock prices, as lower yields make equities more attractive relative to bonds.

Conclusion

The strong performance of the S&P 500 and Nasdaq, coupled with the positive jobs report, has fueled optimism among investors. With the Federal Reserve likely to cut interest rates in September, the market is poised for continued growth. However, the rising unemployment rate and mixed economic signals suggest that caution is still warranted.

Sources

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