Nasdaq 100, Dow Jones, S&P 500 News: Stocks Surge as Weak Jobs Report Fuels Rate Cut Hopes

Stocks saw significant gains on Friday, buoyed by a weaker-than-expected April jobs report, which raised investor optimism about potential interest rate cuts by the Federal Reserve.

At 15:00 GMT, the Dow Jones Industrial Average is trading 38557.39, up 331.73 or +0.87%. The S&P 500 Index is at 5107.46, up 43.26 or +0.85% and the Nasdaq 100 Index is trading 16107.70, up 266.74 or +1.68%.

Jobs Report Analysis

The April nonfarm payrolls reported a gain of 175,000 jobs, falling short of the anticipated 240,000, as per economists surveyed by Dow Jones. This development led to an unemployment rate rise to 3.9% from 3.8% in the previous month, according to the Bureau of Labor Statistics. Moreover, wage growth was lower than expected, signaling weaker inflation pressures, which alleviated some concerns about an overheating economy and rekindled hopes for the Fed’s monetary easing.

Trader Sentiment and Rate Expectations

In reaction to the subdued job growth and moderated wage increases, market participants adjusted their expectations, with the likelihood of a second rate cut by the year’s end climbing to about 72%, according to CME Group’s FedWatch. The bond market responded positively, with the 10-year yield dropping below 4.5%. Remarks from Federal Reserve Chair Jerome Powell also highlighted readiness to adjust policy in response to shifts in the unemployment rate.

Services Sector Contraction

A noticeable shift occurred in the U.S. services sector, which contracted in April for the first time since December 2022. The Institute for Supply Management reported that its services index fell to 49.4, a decline from March’s reading and below expectations. This contraction suggests a cooling in the service sector, often a bellwether for economic health.

Stock Movements and Corporate Updates

Contributing to the stock market’s rally were strong earnings reports from major companies. Apple rose 6.7% following the announcement of a $110 billion share buyback and robust quarterly results. Amgen’s shares jumped 12% after it reported better-than-expected earnings and provided promising updates on a new obesity drug. Conversely, Cloudflare’s shares dipped by 11% after it offered a lackluster full-year guidance despite beating first-quarter expectations.

Market Forecast

Looking ahead, the market is likely to remain sensitive to economic indicators and Federal Reserve signals. The prevailing sentiment is cautiously optimistic, with potential rate cuts on the horizon providing a supportive backdrop for equities. Investors will closely watch upcoming economic data and corporate earnings for further market direction, leaning towards a bullish outlook in the short term.

Technical Analysis

E-mini S&P 500 Index futures are sharply higher on Friday as the market heads towards a significant hurdle in the form of the 50-day moving average at 5183.19.

This indicator is controlling the intermediate trend and should act like a pivot when tested. The return of sellers on the first test of this moving average will suggest the market still has work to do while forming the support base.

However, overtaking it and reestablishing support will signal the presence of buyers, putting the index in a position to sustain the move and drive toward a new record high.