US stocks gain as surprise payrolls fall quells interest rate-hike fears

Wall Street’s main indexes rose on Friday after data showed the US economy unexpectedly shed jobs last month, casting doubt ​on a potential September interest-rate hike by the Federal Reserve.

A Labour Department report showed nonfarm payrolls fell 23,000 in ‌July, far below the 80,000 job ‌additions that economists polled by Reuters were expecting.

“Even with a negative job print, the job market remains healthy. But it gives the Fed some room to pause in September,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial.

“It has seemed like the Fed ‌is pressing more on the inflation front, but today’s numbers may reframe that conversation and put the labor side of the mandate ⁠in focus.”

Money market data showed traders pared back expectations for an interest-rate hike in September, with odds of an increase now at about 20%, from 55% before the report, according to data compiled by LSEG.

Under new Chair Kevin Warsh, the U.S. central bank has offered investors little forward guidance on monetary policy, sharpening the focus on economic data and commentary from policymakers.

Payrolls, however, have a tendency to be softer in July, and economists view the labor market as being in “slow hire, slow fire” ​mode.

At 09:58 a.m. ET, the Dow Jones Industrial Average rose 55.37 points, or 0.10%, to 53,940.47, the S&P ‌500 gained 18.87 points, or 0.25%, to 7,728.83 and the Nasdaq Composite added 181.72 points, or 0.69%, to 26,530.07.

Five of the 11 S&P sectors were trading higher, with consumer discretionary leading gains, while energy lagged.

Collaboration software maker Atlassian jumped 34.5% in early trading, while ⁠chip company Microchip Tech advanced 11.4% after both forecast quarterly revenue above estimates.

The results also lifted broader sectors, with the Philadelphia chips index up 2.3% and the S&P 500 software and services index rising 1.3%.

Cybersecurity company Cloudflare also gained 12% after raising its full-year revenue forecast ​above estimates.

The main ‌U.S. indexes were headed for strong weekly gains, with the S&P 500 and the Dow on track for their ‌best week since April and the Nasdaq set for its biggest advance since May, if gains hold.

Better-than-expected results from AI-related companies this earnings season have propelled the Dow and the S&P 500 to fresh record highs, while helping the Nasdaq recover from a pullback that had ‌briefly pushed it nearly ‌10% below its previous peak.

Of the over 400 companies on ⁠the S&P 500 that have reported earnings so far this quarter, more than 85% have beaten analysts’ ‌expectations, above the 68% beat rate seen in a typical quarter since 1994, according to LSEG I/B/E/S data. Among other movers, vacation rental company Airbnb rose 13.5% after beating second-quarter revenue estimates, while Trade Desk dropped ⁠24.8% after the ad-tech firm forecast third-quarter revenue below expectations.

Advancing issues outnumbered decliners by a 1.95-to-1 ratio on the ​NYSE and by a 1.98-to-1 ratio on the Nasdaq.

The S&P 500 posted three new 52-week highs and one new low while the Nasdaq Composite recorded 71 new highs and 38 new lows.

The dollar fell sharply Friday after the US economy shed thousands of jobs in July, reducing the risk of an interest rate hike by the Federal Reserve that could slow growth in the world’s biggest economy.

Stock markets gained on the report that showed 23,000 jobs were lost last month, well below expectations that 80,000 to 100,000 new jobs would be added and raising fresh worries about the US outlook.

Wall Street indexes rallied on the report in opening deals, flirting again with record highs for the Dow and S&P 500, while European stocks added to earlier gains following a mixed session in Asia.

Combined with steep downward revisions to US jobs readings in May and June, the data is “likely to revive concerns among Fed officials about the health of the labour market and make them less inclined to commit to near-term tightening”, said Thomas Ryan, an economist at Capital Economics.

For Bret Kenwell at trading platform eToro, “This is the kind of report that could revive Wall Street’s ‘bad news is good news’ reflex”.

“Inflation remains a concern, but today’s data may give policymakers more reason to remain patient -- and investors more room to lean into risk,” he said.

Stocks have powered ahead in recent sessions, fuelled largely by tech names after corporate earnings beat forecasts and eased fears about when massive AI investments would start paying off.

Hopes for a US-Iran deal to end the blockage of the Strait of Hormuz added to optimism that oil and gas, along with other key products, would again start flowing freely after more than five months of war.

Crude oil edged lower on Friday, reversing gains seen after reports Iran was planning to block US and Israeli ships from the waterway as part of a deal with Oman.

But analysts said prices were unlikely to fall back to levels seen before the US-Iran war, unless there are concrete signs of a deal in place after days of conflicting comments from officials in both countries.

Agencies