US stocks closed on new all-time highs on Friday after June jobs data came in better than expected, indicating that the world’s largest economy was emerging from the pandemic at a robust pace.
The US job market added 850,000 jobs last month, beating economists’ expectations for 720,000 new jobs and significantly more than the revised figure of 583,000 for May.
Wall Street’s broad S&P 500 and tech-heavy Nasdaq Composite built on records set earlier this week, with both benchmarks rising 0.8 percent. The advance marked the seventh consecutive trading day that the S&P 500 closed on a record, the longest streak since 1997.
The increase brought weekly gains for the S&P 500 to 1.7 percent and to just under 2 percent for the Nasdaq. The latter’s stronger rise reflected the continued shift of investors towards growth and technology stocks, which had lagged earlier this year as portfolio managers bet on stocks of companies locked into the country’s reopening.
Employment numbers were not strong enough to suggest that the US Federal Reserve might be tempted to stem the pandemic-era stimulus measures that have supported asset prices during the health crisis.
“U.S. job numbers couldn’t have brought better news to Wall Street,” said Danni Hewson, a financial analyst at AJ Bell, who said this was a “Goldilocks” moment for the financial markets — “not too hot, not too hot.” cold”.
“Enough new jobs to confirm the economy is running, [but] enough unemployed to give the Fed’s current strategy a warm hug,” she added.
The rise in equities was accompanied by a modest rally in government bonds. The yield on the 10-year US Treasury fell by 0.03 percentage point to 1.42 percent.
While the 10-year yield has risen from the 0.91 percent it started the year, it has fallen from a high of 1.77 percent reached in March. Investors have lowered their inflation expectations over the past month and a half, which has reverberated across markets.
Lower inflation forecasts have increased the appeal of growth and technology stocks whose future gains appear stronger when interest rates are low.
Technology stocks within the S&P 500 gained more than 3 percent this week, their best weekly showing since April. Shares of Apple and Microsoft both rose more than 4 percent during the week, while chipmaker Advanced Micro Devices rose more than 10 percent.
“What works within the market is clearly influenced by rates,” said Jonathan Golub, strategist at Credit Suisse. “And that’s influenced by the belief that inflation won’t be high forever and to the extent that the Fed influences that decision, they affect the markets.”
In Europe, the yield on the equivalent German Bund fell 0.03 percentage point to minus 0.24 percent. The regional Stoxx Europe 600 and Xetra in Frankfurt both closed 0.3 percent higher, while the FTSE 100 in London was flat.
“We think the European market is really benefiting from the depreciation of the euro,” said Bastien Drut, chief thematic macro strategist at CPR Asset Management, referring to a month-long rally of the dollar against its competitors. The single currency, which rose slightly to $1.1863 on Friday, has fallen more than 3 percent against the greenback since early June.
While some decision-makers at the US central bank are starting to talk more openly about the need to prepare for the phasing out of pandemic-era stimulus, the European Central Bank in the eurozone has taken a more moderate stance, reflecting the several recovery on either side of the Atlantic.
Oil prices have been hovering around their highest levels for two-and-a-half years after officials at the OPEC+ meeting of the major crude-producing countries struggled to reach an agreement on production output. Brent oil, the global oil benchmark, and the US marker West Texas Intermediate both rose above $75 a barrel.
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