The major domestic equity indexes closed out the trading day on Friday in positive territory, aided by better-than-expected job growth in March, which eased concerns of an economic slowdown that have periodically roiled financial markets over the past year.
With Friday’s gains, the benchmark S&P 500 has closed higher for seven trading days in a row, its longest winning streak since October 2017.
The Labor Department said nonfarm payrolls rose by 196,000 jobs in March. Data for February was revised upward to a gain of 33,000 jobs instead of the previously reported 20,000, the smallest gain since September 2017.
The data provided reassurance two weeks after the yield curve between three-month Treasury bills and 10-year notes briefly inverted, in what is commonly viewed as a sign of an oncoming recession.
However, wage increases slowed in March, leaving the data broadly supportive of the Federal Reserve’s decision to suspend its three-year campaign to tighten monetary policy.
A dovish Fed along with hopes for a U.S.-China trade agreement have sent the S&P 500 index to its highest level since October 9, putting the index only 1.3 percent below its record closing high.
Stocks across the world also received a lift on word that Beijing and Washington were close to a trade deal.
The coming week will see corporate earnings coming into focus with the major banks scheduled to report quarterly results. The consensus is for corporate earnings of the S&P 500 companies to decline year-over-year for the first time since 2016.
On Friday, energy stocks rose 1.7 percent, the largest percentage gain among S&P 500 sectors, as oil prices firmed after the release of the jobs data and on expectations that conflict in Libya could tighten supply.
Technology stocks rose 0.4 percent, rebounding from Thursday’s decline as shares of Apple and Microsoft were higher on the day.
Dow’s shares helped cap gains on the Dow Industrials. The shares fell 4.1 percent as J.P. Morgan started coverage of the company, which was spun off from DowDuPont Inc, with an “underweight” rating.
Boeing closed out the day down 1.0 after UBS reduced its price target and said the preliminary report following last month’s fatal Ethiopian Airlines crash pointed to MCAS anti-stall software as a contributor to the crash. The software has also been implicated in the fatal crash in October of a Lion Air 737 MAX jet in Indonesia.
Approximately 6.24 billion shares changed hands on the major domestic equity exchanges on Friday, as compared to the 7.33 billion share average over the past 20 trading days.
Job Growth Rebounds
Job growth rebounded from a 17-month low in March as milder weather raised hiring in sectors like construction, which could further allay fears of an abrupt slowdown in economic activity in the first quarter.
Worsening worker shortages and lingering effects of tighter financial market conditions at the turn of the year, however, left job growth below 2018’s brisk pace. According to a report released Friday morning by the Labor Department, closely watched monthly employment report on Friday also showed a small upward revision to February’s meager job gains.
Wage increases also slowed in March and more people left the labor force, leaving the report broadly supportive of the Federal Reserve’s decision last month to suspend its three-year campaign to tighten monetary policy. The Fed lowered expectations of any interest rate increase this year after increasing borrowing costs four times in 2018.
Nonfarm payrolls rose by 196,000 jobs last month. Data for February was revised upward to show payrolls advancing by 33,000 jobs instead of the previously reported 20,000. February job gains were the smallest since September 2017.
The economy has shifted into lower gear as stimulus from the Trump administration’s $1.5 trillion tax cut package as well as increased government spending fades. A trade war between Washington and Beijing and a commensurate slowing global growth have also taken a toll on the economy, which in July will celebrate 10 years of expansion, the longest on record.
The employment report added to fairly upbeat construction spending and factory data that led Wall Street banks to raise their growth estimates for the first quarter.
Growth forecasts for the first quarter are between a 1.4 percent and 2.1 percent annualized rate. The economy grew at a 2.2 percent rate in the fourth quarter, stepping down from the July-September quarter’s brisk 3.4 percent pace.
Average hourly earnings increased by four cents, or 0.1 percent in March after jumping 0.4 percent in February.
That lowered the annual increase in wages to 3.2 percent from 3.4 percent in February, which was the biggest gain since April 2009. Modest wage growth could raise concerns about consumer spending after consumption stalled in January.
The unemployment rate was unchanged at 3.8 percent in March, close to the 3.7 percent that Fed officials project it will be by the end of the year.
Though monthly job gains have moderated from an average of about 223,000 in 2018, they remain above the roughly 100,000 per month needed to keep up with growth in the working-age population.
There are about 7.58 million open jobs in the economy. Vacancies could remain elevated as 224,000 people dropped out of the labor force last month. The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell to 63.0 percent in March from 63.2 percent in February, which was the highest in more than five years.
Economists expect job growth to average about 150,000 per month this year. Employment at construction sites rebounded by 16,000 jobs in March after falling by 25,000 in February. Leisure and hospitality sector payrolls accelerated by 33,000 jobs last month, driven by a 27,300 increase at restaurants and bars.
The manufacturing sector lost 6,000 jobs in March, the first decline in factory payrolls since July 2017. Factory payrolls rose 1,000 in February. Employment at motor vehicle assembly plants fell by 6,300 jobs last month.
Auto manufacturers have announced thousands of job cuts to deal with slowing sales that have led to an inventory bloat.
Professional and business services employment increased by 37,000 jobs last month. The government added 14,000 jobs in March. There were increases in healthcare, transportation and warehousing employment, as well as financial activities, utilities and information industries.
However, retail payrolls fell for a second straight month in March. The length of the average workweek rose to 34.5 hours from 34.4 hours in February.