Wall Street stocks rose on Friday as a surprisingly strong jobs report clouded investors’ expectations of upcoming interest rate hikes and the latest round of earnings reports offset some fears about falling corporate profits.
The S&P 500 climbed half a percent, a day after its biggest one-day decline in nearly a year. The index ended the week with a gain of 1.6%. The Nasdaq composite rose 1.6% on Friday.
Markets were initially choppy after the government announced that US employers added 467,000 jobs in January, well above expectations for an increase of about 125,000 jobs. The Department of Labor also revised up hiring figures for the previous two months.
Economists had warned against reading too much of Friday’s report – noting that the data was collected in the first weeks of the year, when coronavirus cases hit 800,000 a day, and quirks in the data could skew the results.
But investors took the strong performance as reason for the Federal Reserve to act quickly as it begins raising interest rates this year. The Fed has previously cited the strength of the labor market as a reason to focus on fighting inflation and has made it clear that its path will be determined by economic data.
Equities have had a volatile start to the year as traders brace for these rate hikes. As inflation climbs rapidly, investors are wondering how fast and how high rates will rise. The first increase could come as early as next month, policymakers signaled in late January.
“The report highlights an incredibly strong economy,” said Beth Ann Bovino, chief U.S. economist at S&P Global. “The Fed is now on solid footing and we expect it to hike rates six times in 2022. This is just one more reason for the Fed to continue to tighten policy this year.”
The reaction was most evident in the bond market, where government bond yields jumped after the report. The yield on 10-year Treasury bills rose from 1.82% to 1.93%, while those on two-year Treasury bills jumped to 1.31%, the highest since February 2020.
Amazon shares jumped 13.5% after the company said Thursday that its revenue hit a record $137.4 billion in the last three months of last year. Amazon also announced that it would raise the annual price of its Prime shipping club for the first time since 2018 to $139, from $119.
Meta, Facebook’s parent company, fell about 0.3% on Friday, a day after plunging more than 26%. Meta slumped on Thursday after saying Facebook had lost users and a privacy change by Apple last year would cost it advertising money this year.
Other social media stocks fared better on Friday, rebounding from a decline the previous day. Snap jumped 58.8%, rebounding from a loss of more than 23% on Thursday, after the company reported its first quarter of profits, earning $22.5 million in the last three months of 2021. Twitter, which reports earnings next week, climbed 7.2%.
Shares of major banks also edged higher after the jobs report gave investors more certainty about the outlook for higher interest rates. Lenders are expected to reap higher profits as interest rates on loans rise, and Bank of America, JPMorgan Chase, Goldman Sachs and Citigroup were all higher.
Oil markets rallied on Friday as a winter storm disrupted made in Texas. West Texas Intermediate, the US crude benchmark, settled above $92 a barrel. Shares of energy companies also rose. Occidental Petroleum and Exxon Mobil each rose about 2%.
Investors will be laser-focused next week on new inflation data. On Thursday, the Labor Department will release its consumer price gauge for January. The consumer price index rose at the fastest pace since 1982 in December.
Other big companies, including Disney and Coca-Cola, will report on their financial performance for the last three months of 2021. So far, just over half of S&P 500 companies have released their earnings reports quarterly results, with 76% exceeding estimates. , according to data compiled by FactSet.