The major domestic equity indexes were higher on Friday, buoyed by a solid payrolls report for November that locked in expectations for an interest rate hike by the Fed next week and raised optimism about economic prospects in 2018.
Technology stocks such as Microsoft, Apple and Oracle helped pace the advance, as they continued to rebound from a selloff in the sector earlier in the week.
Nonfarm payrolls rose by 228,000 jobs last month amid broad gains in hiring as the distortions from the recent hurricanes faded, Labor Department data showed, topping expectations calling for a rise by 200,000 jobs.
Average hourly earnings rose 0.2 percent in November after dipping 0.1 percent the prior month, but fell shy of the estimated 0.3 percent rise.
For the week, the Dow rose 0.4 percent, the S&P advanced 0.35 percent and the Nasdaq fell 0.11 percent.
The jobs data cemented expectations the Fed will raise rates at its meeting next week as traders now see a 96.2-percent chance of a quarter-point hike, according to Thomson Reuters data.
President Trump signed legislation to fund the federal government for two more weeks, averting a government shutdown while Congress negotiates a longer-term budget deal, temporarily removing a potential headwind for stocks.
Microsoft rose 2.02 percent, giving the greatest boost to the S&P 500. The S&P technology sector was up 0.4 percent and was on track for its fourth straight day of gains, erasing all of the nearly 2-percent decline suffered by the sector to start the week.
Alexion Pharmaceuticals rose 7.2 percent and was the best performer on the S&P, after a report said hedge fund Elliott Management wanted the company to take steps to raise its share price, including exploring a sale. The gained lifted the S&P healthcare sector 1.1 percent.
Shares of American Outdoor Brands fell 9.5 percent after the Smith & Wesson firearms maker provided a disappointing earnings forecast. Shares of peer Sturm Ruger chalked up a loss of 8.0 percent.
Approximately 5.85 billion shares changed hands on the major domestic equity exchanges, as compared to the 6.53 billion share daily average over the past 20 sessions.
Job Numbers Look Good
Job growth continued its strong pace during November, and wages rebounded, a portrayal of a healthy economy that does not require additional fiscal stimulus, especially of the kind that President Trump is proposing.
Nonfarm payrolls rose by 228,000 jobs last month amid broad gains in hiring as the distortions from the recent hurricanes faded, Labor Department data showed on Friday. The government revised data for October to show the economy adding 244,000 jobs instead of the previously reported 261,000 positions.
Employment gains in October were helped out by the return to work of thousands of employees who had been temporarily dislocated by Hurricanes Harvey and Irma. November’s report was the first clean reading since the storms, which also impacted September’s employment data.
Average hourly earnings rose five cents or 0.2 percent in November after dipping 0.1 percent the prior month. That lifted the annual increase in wages to 2.5 percent from 2.3 percent in October. Workers also put in more hours last month. The average workweek rose to 34.5 hours from 34.4 hours in October.
The unemployment rate was unchanged at a 17-year low of 4.1 percent amid a rise in the labor force.
The upbeat report underscored the economy’s strength and could fuel criticism of efforts to reduce the corporate income tax rate to 20 percent from 35 percent.
The argument in favor is that the proposed tax cut package will increase economic growth and allow companies to hire more workers. However, with the labor market near full employment and companies reporting difficulties finding qualified workers, that is unlikely to happen. Job openings are near a record high.
The economy grew at a 3.3 percent annualized rate in the third quarter, the fastest in three years.
While November’s employment report will probably have little impact on expectations that the Federal Reserve will raise interest rates at its Dec. 12-13 policy meeting, it could help shape the debate on monetary policy next year.
Employment growth has averaged 174,000 jobs per month this year, down from the average monthly gain of 187,000 in 2016. A slowdown in job growth is normal when the labor market nears full employment.
The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population. The unemployment rate has declined by seven-tenths of a percentage point this year.
A broader measure of unemployment, which includes people who want to work but have given up searching and those working part time because they cannot find full-time employment, ticked up to 8.0 percent last month from a near 11-year low of 7.9 percent in October.
A shrinking slack in the labor market will likely result in a faster pace of wage growth next year. When combined with the tax cuts, inflation is likely to increase.
The growth in employment was broad in November. Construction payrolls increased by 24,000 jobs, thanks in part to rebuilding efforts in the areas devastated by the hurricanes, after rising 10,000 in October.
Manufacturing chalked up another month of solid job gains, with payrolls increasing by 31,000 jobs after rising 23,000 in the prior month. Retail payrolls grew by 18,700 jobs last month, the largest gain since January, due most likely to hiring for the holiday season.
Employment at department stores increased by 3,100 jobs last month. Retailers, including Macy’s reported strong Black Friday sales. Macy’s said this month it would hire an additional 7,000 temporary workers for its stores to deal with heavy customer traffic in the run-up to Christmas.
Payrolls at non-store retailers, however, fell by 2,600 jobs. Government hiring increased by 7,000 jobs after declining for two straight months. Restaurants and bars hired 18,900 more workers last month.