The three major domestic equity indexes rose more than 1 percent on Friday after weaker-than-expected wage growth helped to calm concerns over rising interest rates and inflation, though the S&P 500 and Dow Jones Industrial Average still chalked up losses for the week.
Apple was the best aid to the markets, rising to a record high of $184.25 during the session after Warren Buffett’s Berkshire Hathaway disclosed that it had raised its stake in the company.
Apple closed out the week on Friday up 3.9 percent at $183.83. The company’s shares chalked up their largest weekly percentage gain since October 2011.
At the open, the equity indexes moved sharply into negative territory after the Labor Department reported the unemployment rate had fallen to a 17 year low of 3.9 percent.
The S&P 500 bounced off its 200-day moving average, a technical level that indicates the long-term trend.
The major equity indexes climbed as the session progressed. The ow unemployment figure, which on its own might point to inflationary pressure on wages, was countered by April’s mere 0.1-percent rise in wages, which was below expectations.
For the week, the Dow was down 0.2 percent, the S&P fell 0.24 percent, while the Nasdaq gained 1.26 percent on the strength of tech stocks’ rally on Friday. The S&P 500 technology sector rose 2.0 percent.
All the 11 major S&P sectors were higher, and 29 of the 30 Dow members were in the black, with Chevron the lone exception.
Pandora Media rose 19.8 percent after the music-streaming service provider reported a smaller-than-expected quarterly loss. Shares of CBS were up 9.1 percent after the media company topped revenue and earnings estimates for the first quarter.
Fluor was down 22.4 percent, the most on the S&P, after the engineering and construction company posted a surprise quarterly loss due to issues with a gas-fired power project.
Approximately 6.37 billion shares changed hands on the major domestic equity exchanges, as compared to the 6.57 billion share average over the past 20 trading days.
Job Growth Muted
The jobs number increased less than expected during April and the unemployment rate fell to r a 17 year low of 3.9 percent as some jobless Americans left the labor force.
The Labor Department’s closely watched report indicated that wages were virtually unchanged last month, which could ease concerns over the possibility of rising inflation pressures.
According to the report by the Labor Department nonfarm payrolls increased by 164,000 jobs last month. Data for March was revised up to show payrolls rising by 135,000 jobs instead of the previously reported 103,000.
That was still the fewest number of jobs created in six months and followed an outsized gain of 324,000 in February.
While cold weather in March and April probably held back job growth, hiring is moderating as the labor market hits full employment. At the same time there is an increase in reports of employers, especially in the construction and manufacturing sectors, struggling to find qualified workers.
The drop of two-tenths of a percentage point in the unemployment rate from 4.1 percent in March pushed it to a level last seen in December 2000 and within striking distance of the Fed’s forecast of 3.8 percent by the end of this year. It was the first time in six months that the jobless rate dropped.
Meanwhile, 236,000 people left the labor force in April. The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell to 62.8 percent last month from 62.9 percent in March.
Average hourly earnings rose four cents, or 0.1 percent, last month after gaining 0.2 percent in March. That left the annual increase in average hourly earnings at 2.6 percent. The average workweek was unchanged at 34.5 hours last month.
While average hourly earnings have suggested only a gradual increase in wage inflation, other measures have been more robust. The Employment Cost Index (ECI), widely viewed by policymakers and economists as one of the better measures of labor market slack, increased solidly in the first quarter.
The ECI report showed wages rising at their fastest pace in 11 years during the period.
Even with the annual increase in average hourly earnings still moderate, inflation is flirting with the Fed’s 2 percent target.
The Fed’s preferred inflation measure, the personal consumption expenditures price index excluding food and energy, was up 1.9 percent year-on-year in March after a 1.6 percent rise in February.
The U.S. central bank on Wednesday left interest rates unchanged and said it expected annual inflation to run close to its “symmetric” 2 percent target over the medium term. The consensus interpretation of symmetric is that policymakers would not be too concerned with inflation overshooting the Fed’s planned target. The Fed hiked rates in March and has forecast at least two more increases for this year.
It is possible that the unemployment rate will go as low as 3.5 percent by the end of the year. Though the decline in the labor force accounted for the drop in the unemployment rate last month, labor market slack is diminishing. That, together with a shortage of skilled workers, could result in some upward pressure on wages in the months ahead,.
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, dropped to 7.8 percent last month, the lowest level since July 2001, from 8.0 percent in March.
The economy needs to create roughly 120,000 jobs per month to keep up with growth in the working-age population. Employment gains have averaged 199,750 jobs per month this year.
Construction payrolls rebounded by 17,000 jobs last month after recording their first drop in eight months in March. Manufacturing employment increased by 24,000 jobs in April after a gain of 22,000 positions in March.
The retail sector added 1,800 jobs. Payrolls for temporary help, seen as a harbinger of future permanent hiring, rose by 10,300 after falling by 2,100 in March. Leisure and hospitality employers added 18,000 jobs last month.
Government payrolls fell 4,000 in April amid a decline in education employment at state governments.