US equities end higher Friday, S&P 500 rises for third week in a row, after job report in March strengthens expectations for Fed rate hikes

All three major US stock benchmarks closed higher on Friday after a March job report reinforced a picture of a healthy economy, but also underlined expectations that the Federal Reserve will be more aggressive in raising interest rates in an attempt to curb sustained hot inflation.

How did the stock index perform?
  • Dow Jones Industrial Average DJIA
    rose 139.92 points, or 0.4%, to close at 34,818.27.

  • S&P 500 SPX
    added 15.45 points, or 0.3%, to finish at 4,545.86.

  • Nasdaq Composite COMP
    rose 40.98 points, or 0.3%, to 14,261.50.

On Thursday, the Dow index fell 550.46 points to a 1.6% drop. The S&P 500 experienced a similar decline, while the Nasdaq Composite fell 1.5 percent. For the quarter, all three benchmarks recorded the largest percentage declines since the first quarter of 2020 – 4.6%, 4.9% and 9.1%, respectively.

Read: A dozen S&P 500 stocks have just had their worst quarter ever as technology stocks fell by nearly $ 2 trillion in value

For the week, the Dow fell 0.1%, while the S&P 500 rose 0.1% and the Nasdaq rose 0.7%. The Dow recorded two weeks of gains in a row, while the S&P 500 and Nasdaq each advanced for a third week in a row, according to Dow Jones Market Data.

What drove the markets?

Major U.S. stock benchmarks ended higher Friday, after a choppy trading session, as investors analyzed job and manufacturing data against their expectations for the Federal Reserve’s future rate hikes.

The U.S. economy created healthy 431,000 jobs in March, and unemployment fell to 3.6% from 3.8%. Economists polled by The Wall Street Journal had predicted a total wage increase of 490,000 jobs in March and a fall in unemployment to 3.7% from 3.8%.

“It was a good report,” Russell Price, chief economist at Ameriprise Financial, said in a telephone interview Friday. “It’s a sign of a healthy underlying economy.”

Hourly wages rose sharply, pushing the rise over the past 12 months to 5.6%, the highest level since the early 1980s. Employment in January and February combined is 95,000 higher than previously reported, the Ministry of Labor said.

“For the Fed, today’s report gives them little consolation. With wage growth so high, fears of inflation are only rising. A 50 [basis point] hiking at the next meeting is certainly guaranteed. The only question that really remains is how many more 50 bps moves there will be this year, ”said Seema Shah, chief strategist at Principal Global Investors, in emailed comments.

Also see: The US job market is burning hot. Here the flames are highest

Ameriprise’s Price told MarketWatch he would not be “surprised” to see the Federal Reserve raise its benchmark rate by 50 basis points in May to combat high inflation. Chicago Federal Reserve President Charles Evans said Friday that he still supports a path of steady interest rate hikes of 25 basis points until next March.

Treasury rates rose after job data was released, and the rate on the 2-year note moved back above the 10-year rate, inverting this target for the yield curve. That goal was briefly reversed earlier in the week. A sustained inversion is considered by many economists and market observers as a reliable warning sign of recession, albeit with a delay of up to a year or more.

Price said he does not expect a recession in 2022 or 2023, “primarily because consumer finances are so strong.”

Read: What stock market investors need to know about the bond market recession signal

In other US economic data on Friday, S&P Global US Manufacturing shows
The Purchasing Managers’ Index final reading for March was 58.8, up from 57.3 in February. The improvement in health for the U.S. manufacturing sector was generally steep and the sharpest since September last year, said Chris Williamson, chief economist at S&P Global.

However, the Institute for Supply Management’s manufacturing PMI, a closely followed index of U.S.-based manufacturing activity, fell to 57.1% in March from 58.6% a month earlier, the research group said, its lowest reading since September 2020. Economists surveyed by The The Wall Street Journal had predicted a slight improvement to 59%.

“Is the demand for manufactured goods finally declining?” said Price, pointing to the drop in new orders. “We may be at a time when the supply of manufactured goods is finally catching up with demand.”

Investors were also keeping a close eye on the war in Ukraine as traders from both sides were expected to hold video conference talks on Friday. Russia blocked a humanitarian relief convoy from reaching the fought Mariupol as eastern Ukraine prepares for more attacks.

The stock market may “exhale” after having “a pretty good March” and being “within shouting distance” from a record high despite geopolitical concerns and hot inflation, says Dave Grecsek, CEO of Investment Strategy and Research at Aspiriant. in a phone interview Friday. The S&P 500 closed 5.2% on Friday from its record high of January 3, according to Dow Jones Market Data.

Given the current level of the stock market, the war between Russia and Ukraine, and expectations that the Fed will potentially become more aggressive rate hikes to combat high inflation, “it is not a good setup to really encourage risk-taking,” Grecsek said.

Which companies were in focus?
  • U.S. listed Chinese stocks rose sharply following a report that Chinese authorities will give U.S. regulators full access to audit reports. Shares of DiDi Global Inc.
    DIDI
    jumped 12.8%, mens Bilibili Inc.
    BILI,
    Pinduoduo Inc.
    PDD,
    iQIYI Inc.
    IQ,
    Alibaba Group Holding Ltd.
    BABY
    and NIO Inc.
    NIO
    also saw solid increases in their stock prices.

  • Shares of GameStop Corp.
    GME
    fell about 1% after the company said it was looking to implement a share split for the first time in 15 years.

Read: AMC, GME and meme stocks are back in the spotlight – How will professional traders handle it this time around?

How were other assets?
  • The yield on the 10-year government bond rose 5 basis points to 2.374% on Friday. For the week, the 10-year interest rate fell by 11.7 basis points, the largest weekly decline since the stretch, which ended March 4, based on eastern times at. 15, according to Dow Jones Market Data. Government bonds and prices are moving in opposite directions.

  • ICE US Dollar Index DXY,
    a measure of the currency relative to a basket of six major rivals, rose 0.3% on Friday but showed a weekly decline of 0.2%.

  • In oil futures, West Texas Intermediate crude oil for May delivery CLK22
    fell 1% to settle at $ 99.27 per barrel, the lowest finish since March 16th.

  • Gold futures ended lower, with gold up for delivery in June GCM22
    falling nearly 1.6% to settle at $ 1,923.70 an ounce.

  • Bitcoin BTCUSD
    rose about 1.3% to $ 46,341.

  • In European equities, Stoxx Europe is 600 XX: SXXP
    closed 0.5% higher on Friday, rising 1.1% for the week. London’s FTSE 100 UK: UKX
    rose 0.3% Friday to a weekly increase of 0.7%.

  • In Asia, Shanghai Composite is CN: SHCOMP
    closed 0.9% higher on Friday, bringing its weekly increase to 2.2%. Hang Seng Index HK: HSI
    rose 0.2% on Friday and rose 3% for the week. Japanese Nikkei 225 JP: NIK
    fell 0.6% on Friday and booked a weekly drop of 1.7%.

—Barbara Kollmeyer contributed to this report.

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