Stocks Rally on Strong Jobs Report Despite Rate Cut Concerns

Explore how the recent strong jobs report fueled a stocks rally, defying concerns over potential rate cuts. Key insights into market dynamics.

Wall Street closed out the week with solid gains on Friday, as investors welcomed a surprisingly strong March jobs report despite concerns about its potential impact on interest rates. The Dow Jones Industrial Average rose 0.8% to 38,904, the S&P 500 gained 1.1% to 5,204, and the Nasdaq Composite advanced 1.2% to 16,248. The rally came after a sharp reversal lower for stocks on Thursday, and the volatility could continue next week with several key events on the horizon.

March Jobs Report Exceeds Expectations, Raises Inflation Concerns

The U.S. economy added 303,000 new jobs in March, significantly exceeding economists’ expectations of 200,000. The unemployment rate edged down to 3.8% from 3.9%. While the robust job growth is a positive sign for the economy, it has also raised concerns about inflation and the Federal Reserve’s interest rate plans.

Average hourly earnings rose at their slowest annual rate since June 2021, which could support calls for the Fed to start cutting rates. However, the 0.3% month-over-month rise in wages was quicker than the 0.1% increase seen in February. As a result, the likelihood of a June rate cut dropped to 51% from 59% the previous day, according to CME Group’s FedWatch Tool.

Despite these mixed signals, investors appeared to focus on the positive aspects of the report. “This morning’s blowout jobs numbers show that the economy isn’t showing any signs of slowing down and consumer spending should be able to hold up in the near term,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

Individual Stock Movements and Upgrades

In individual stock news, Snowflake (SNOW) rose 1.7% after receiving an upgrade to Buy from Rosenblatt Securities. The analyst cited solid IT spending, accelerating digital transformation trends, and a “strong first-quarter performance from the leading cloud service providers” for the upgrade.

Meanwhile, Tesla (TSLA) fell 3.6% on reports of the company scrapping plans for a low-cost car. The company has yet to formally comment on the speculation, although CEO Elon Musk wrote on his social media platform, X, that “Reuters is lying (again).”

Other notable stock movements included gains in technology companies, with chipmaking giant Nvidia rising 2.4% and Google’s parent company, Alphabet, rising 1.3%. The gains were broad, with every sector in the S&P 500 finishing in the green.

Key Events to Watch Next Week

Looking ahead, investors will be closely monitoring several key events next week. One is oil prices, which have risen nearly 22% year-to-date. The rise in oil prices “threatens the ‘inflation is falling’ narrative and has driven expectations higher,” according to Liz Young, head of investment strategy at SoFi.

Another focus will be the March Consumer Price Index (CPI) report, set for release on Wednesday morning. The report will provide further insight into the state of inflation and its potential impact on the Fed’s interest rate decisions.

Finally, the start of the first-quarter earnings season will be in focus, marked by Friday’s results from several big banks, including JPMorgan Chase (JPM). While next week’s earnings calendar is relatively light, the reports will provide an early look at the health of corporate profits.