U.S. stocks rose on Friday following an employment report that showed the U.S. gained 222,000 jobs in June, representing the second-largest job haul of the year and underscoring that the labor market remains healthy.
The Labor Department said unemployment ticked up to 4.4% from 4.3%. Economists polled by MarketWatch had forecast a gain of 180,000 and unemployment to hold at 4.3%.
The Dow Jones Industrial Average DJIA, +0.27% climbed 63 points, or 0.3%, at 21,383, powered by gains in McDonald’s Corp. MCD, +1.59% and Visa Inc. V, +1.09% which were both up sharply in early trade.
The S&P 500 index SPX, +0.33% gained about 9 points, or 0.4%, at 2,418, led by a 1.1% climb in the tech sector, but a 1% drop in energy stocks, led by 4% falls in shares of Devon Energy Corp. DVN, -3.29% and Chesapeake Energy Cop. CHK, -3.97% as crude-oil prices were under pressure.
Meanwhile, the tech-laden Nasdaq Composite Index COMP, +0.65% rallied, advancing 41 points, or 0.7%, at 6,132.
For the holiday-shortened week, the Dow is on track to book a 0.1% gain. However, the S&P 500 is on pace for a weekly decline of 0.2%, while the Nasdaq is on pace for drop of 0.1% over the same period.
The government employment report also indicated that readings for jobs in May and April were better than previously reported, perhaps adding more support for the Federal Reserve to continue its plan to normalize monetary policy, lifting rates at least once more in 2017 and kicking off its $4.5 trillion balance-sheet reduction as early as September.
“[A headline reading of] 222,000 and a 16,000 upward revision to last month are a lot better than people were expecting,” Colin Cieszynski, chief market strategist at CMC Markets, told MarketWatch. “Wages were slightly below expectations which has knocked down [the U.S. dollar] and boosted the Dow,” he said.
Average hourly pay rose 0.2% to $26.25 an hour in June, below expectations for a 0.3% gain. Wages have climbed a modest 2.5% in the past 12 months, but pay is still below the usual gains at this point in a cycle of expansion.
Despite lackluster wage growth, which is viewed as a proxy a for stubbornly low inflation, Cieszynski said he viewed the climb in wages as strong and unlikely to change the Federal Reserve’s monetary-policy trajectory as it looks to lift interest rates at least once more in 2017 and unwind its $4.5 trillion asset portfolio.
On Thursday, the Nasdaq Composite Index fell the most in Thursday’s trade, ending 1% lower as investors continued to rotate out of battered technology names. The S&P 500 and Dow average fell 0.9% and 0.7%, respectively, as bonds dropped sharply, sending yields higher.
“The rising yields are a reaction to the shift in emphasis from central banks away from their long held view that advocates ultraloose monetary policy,” said Richard Perry, market analyst at Hantec Markets, in a note. “However, can the data back this up?”
The yield on 10-year U.S. Treasury notes TMUBMUSD10Y, +0.60% rose 1.4 basis point on Friday to 2.38%, around its highest in eight weeks.
J.J. Kinahan, chief strategist at TD Ameritrade, said Friday’s action, with stocks climbing at the same time as government bond yields, could be viewed as a healthy sign for Wall Street. Thursday’s dynamic of bond prices sinking, pushing yields higher, as stocks also declined runs against the grain of the natural relationship between stocks, perceived as risky and haven bonds, which are typically bought as equities tumble.
“Yields are going back higher and we are finally starting to see a little separation between bonds and stocks and we’ll see if this relationship stays because the traditional relationships have been screwed up [due to central-bank interventions],” he said.
Economic data: The Fed will release its semiannual monetary policy report to Congress at 11 a.m. Eastern.
Another potentially significant event for markets on Friday, is the two-day G-20 leaders’ gathering in Hamburg, Germany.
President Donald Trump is meeting with Russian counterpart Vladimir Putin for the first time since taking office, as well as Chinese President Xi Jinping.
“Watching how host Angela Merkel balances the demands of President Trump, especially after the speech he gave [in Warsaw], and of President Putin, and of President Xi is likely to prove more compelling viewing for markets than the average summit — especially given the background of central banks suddenly pulling the carpet out from under them all,” said Michael Every, senior strategist at Rabobank, in a note.
As the leaders arrived on Thursday, police clashed with thousands of protesters as around 12,000 people joined in a protest dubbed “Welcome to hell.”
Oil blues: In a volatile week for oil prices, crude oil CLQ7, -3.21% slumped 2.4% on ongoing concerns that production cuts led by the Organization of the Petroleum Exporting Countries aren’t enough to balance the oil market.
Stocks to watch: Shares of Qualcomm Inc. QCOM, +0.38% gained 0.6% as the company on Thursday filed a complaint against Apple Inc. AAPL, +0.78% saying the tech giant infringed several of Qualcomm’s patents on wireless technology in iPhones and iPads. Apple shares rose 0.7%.
Shares of Campbell Soup Co. CPB, +0.45% rose 0.5% as it said late Thursday that it would buy organic-soup company Pacific Foods for $700 million.
Synchronoss Technologies Inc. SNCR, +3.75% rallied 5.2% after its board late Thursday said it would explore strategic alternatives, including a sale of the wireless-software company.
Bond yields in Europe were relatively stable, with borrowing costs on German paper TMBMKDE-10Y, -0.05% marginally lower at 0.565%.
Silver SIU7, -2.15% was down 1.4%, at $15.76 an ounce. The metal earlier in the session tanked almost 10% to $14.34 in a flash crash that likely was due to a trading error. Gold GCQ7, -0.76% traded 0.7% lower at $1,221.40 an ounce.