Stocks jump, on track for best week since late November
United States (US) stocks moved broadly higher for a fourth consecutive day on Friday as investors look to start June with a strong weekly gain after a downturn in May.
Investors bought stocks and bonds after a report showing weaker-than-expected hiring in the US in May appeared to increase the odds the Federal Reserve will have to cut interest rates in the coming months. Federal Reserve Chairman Jay Powell had signalled the possibility earlier in the week.
The lacklustre jobs report could be a sign that businesses are becoming more cautious as economic growth slows and the US engages in multiple trade conflicts.
Bond prices rose, pushing yields lower, also a sign that the market is worried about economic growth. The yield on the 10-year Treasury fell to 2.07 per cent from 2.12 per cent on Thursday. Banks, which rely on higher yields for profit from loan interest, fell broadly and held back gains for the financial sector.
But most sectors soared higher. Technology stocks led gains on Friday. Microsoft rose 1.6 per cent and Apple rose one per cent. Health care companies and internet stocks were also among the Largest gainers. Johnson & Johnson rose 1.3 per cent and Facebook rose 1.6 per cent.
Investors are also optimistic about prospects for a US-Mexico trade deal. The US is poised to start imposing five per cent tariffs on Mexican goods Monday, but both sides are negotiating, and media reports have suggested that the US could consider delaying the tariffs.
The S&P 500 index rose 1.3 per cent as of 10:55 a.m. Eastern time and was on track for its best week since late November. The Dow Jones Industrial Average rose 329 points, or 1.3 per cent, to 26,049. The Nasdaq composite rose 1.8 per cent.
This week’s gains have offset some of the losses from May, when US President Donald Trump escalated trade wars with China and Mexico by threatening or imposing new tariffs. That disrupted a strong run by the market to start the year that culminated in the S&P hitting a new high on April 30.
Technology stocks suffered a sharp blow from the ramped-up disputes, particularly with China. Even with this week’s gains, the technology-heavy Nasdaq is down 6.7 per cent since hitting a record on May 3, and technology stocks within the broad S&P 500 index have fallen 5.4 per cent.
Meanwhile, Facebook and Google parent Alphabet dragged down the Internet-heavy communications sector over the month. The sector is suffering the most and is down almost six per cent from its April 29 high. Consumer-related stocks are down about six per cent, with a large portion of companies depending on China for significant revenue.
Meanwhile, investors have signalled their expectation that the Federal Reserve would have to cut rates because of a cooling economy by buying bonds. The yield on the 10-year Treasury is now 2.07 per cent, down from a close of 2.48 per cent on April 7. Yields move inversely to bond prices.
Gold, which is also viewed as a safe-play investment, gained five per cent over the last month.