Wall Street rises after solid jobs data boosts chances for a coming rate cut

U.S. stocks are ticking higher Friday after data suggested the job market remains solid enough to  keep the economy going, but not so strong that it raises immediate worries about inflation.

The S&P 500 added 0.3% and was just above its all-time high set on Wednesday. It’s rolling toward the close of a third straight winning week in what’s likely to be one of its best years since the 2000 dot-com bust. The Dow Jones Industrial Average was 31 points higher, or 0.1%, as of 10:05 a.m. Eastern time, and the Nasdaq composite climbed 0.6%.

Stocks rose as the latest jobs report sent Treasury yields down and expectations up among traders that the Federal Reserve will cut interest rates again at its next meeting in two weeks. While the report showed U.S. employers hired more workers than expected last month, it also said the unemployment rate unexpectedly ticked up to 4.2% from 4.1%.

“This print doesn’t kill the holiday spirit and the Fed remains on track to deliver a cut in December,” according to Lindsay Rosner, head of multi-sector investing within Goldman Sachs Asset Management.

The Fed began easing its main interest rate from a two-decade high in September to offer more help for the slowing job market, after bringing inflation nearly all the way down to its 2% target. Lower interest rates can ease the brakes off the economy, but they can also offer more fuel for inflation.

Expectations for a series of cuts from the Fed have been a major reason the S&P 500 has set an all-time high 56 times so far this year. And the Fed is part of a global surge: 62 central banks have lowered rates in the past three months, the most since 2020, according to Michael Hartnett and other strategists at Bank of America.

Still, the jobs report may have included some notes of caution for Fed officials underneath the surface.

Scott Wren, senior global market strategist at Wells Fargo Investment Institute, pointed to average wages for workers last month, which were a touch stronger than economists expected. While that’s good news for workers who would always like to make more, it could also keep upward pressure on inflation.

“This report tells the Fed that they still need to be careful as sticky housing/shelter/wage data shows that it won’t be easy to engineer meaningfully lower inflation from here in the nearer term,” Wren said.

So, while traders are betting on a 90% probability the Fed will ease its main rate in two weeks, they’re much less certain about how many more cuts it will deliver next year, according to data from CME Group.

For now, the hope is that the job market can help U.S. shoppers continue to spend and keep the U.S. economy out of a recession that had seemed inevitable after the Fed began hiking interest rates so swiftly to crush inflation.