The S&P 500 and Nasdaq ended the week at record highs Friday, as a stronger jobs report pointed to underlying strength in the economy, sending U.S. bond yields lower, and tech stocks higher.
The S&P 500 rose 0.7% to a closing high of 4,352.34. The Dow Jones Industrial Average climbed 0.4%, or 145 points, the Nasdaq was up 0.8% to the day at closing record of 14,639.33.
The economy created 850,000 jobs in June, a sharp increase from the 583,000 in April, well ahead of economists’ forecast of 720,000. It was the largest gain in 10 months.
”Labor shortages are still an issue, but employers seem to be adjusting to the new reality and finding ways to attract workers with higher wages and/or sign-on bonuses,” Jefferies (NYSE:JEF) said in a report.
Average hourly earnings climbed 0.3% in June increase in wages, but that was “distorted by disproportional job gains in leisure & hospitality and retail,” Jefferies added. “After adjusting for industry mix shifts, wages rose by 0.5% month-on-month in June, and are up 4.5% year-on-year.”
The expected increase in the wages will likely boost inflation and may lead to the tightening its monetary policy sooner than expected.
“If this trend does materializes this will be a key factor that will mean inflation stays elevated for even longer. We believe headline inflation will stay above 4% well into 2022 and take the view that it is increasingly probable the Federal Reserve will end up raising interest rates in 2022,” ING said.
U.S. bond prices, which trade inversely to yields, shrugged off the prospect of the sooner rather than later monetary policy, to trade higher. Falling bond yields, the ally of stocks with higher valuations, helped lift tech stocks.
Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) Alphabet (NASDAQ:GOOGL) Amazon.com (NASDAQ:AMZN) and Facebook (NASDAQ:FB), which together make up about quarter of the S&P 500 weighting were up more than 1%.
Energy, meanwhile, clawed back some of its gains from a day earlier as the OPEC+ meeting ending without a deal. The United Arab Emirates failed to go ahead with a preliminary agreement - to reportedly raise output by 400,000 barrels per day from August to December - struck by Saudi Arabia and Germany. The meeting will reconvene on Monday.
In other news, Lordstown Motors (NASDAQ:RIDE) ended 11% lower on reports that the The Justice Department is investigating the company. The probe followed an investigation from the Securities and Exchange Commission into the company concerning claims by a short seller that the company misled investors.