Dow Gains 450, Nasdaq Soars 2% on Rate Outlook

Wall Street surged to a higher close Friday as a softer-than-expected employment report bolstered the case for rate cuts from the Federal Reserve while also providing evidence of U.S. economic resilience.

All three major U.S. stock posted robust gains. The tech-heavy Nasdaq led the pack with an assist from Apple shares following the iPhone maker’s record share buyback announcement.

All three indexes were on track for their second straight Friday-to-Friday gains, capping a week in which markets were encouraged by Fed Chair Jerome Powell’s more dovish-than-expected statements following Wednesday’s rate decision.

The Labor Department’s employment report showed the U.S. economy added fewer jobs than expected, while the unemployment rate ticked higher and wage growth unexpectedly cooled.

The report likely hit the sweet spot for the Fed, offering signs the labor market is softening, which Powell has deemed necessary to put inflation on a sustainable downward path. The report also provided assurances on U.S. economic health.

The report prompted investors to raise bets the Fed would implement its first rate reduction in September.

“The investor narrative remains the Fed and interest rates and today’s weak jobs report puts rate cuts firmly on the Fed’s 2024 agenda,” said Greg Bassuk, CEO at AXS Investments in New York. “And while ‘higher for longer’ remains the roadmap, this economic data is being warmly embraced by investors, Wall Street and Main Street, across all sectors”

Fed officials weighed in on the data.

Fed Governor Michelle Bowman reiterated her willingness to hike rates if inflation progress reverses, and Chicago Fed President Austan Goolsbee said the employment report boosted confidence the economy is not overheating.

“Let’s remember, it’s early May; we shouldn’t pretend that the year’s over or somehow every card has been played,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. “But I don’t think for a second that any Fed official really believes that a rate hike is appropriate given current conditions and data.”

First-quarter earnings season is approaching the final stretch, with 397 of the companies in the S&P 500 having reported as of Friday morning. Of those, 77% have posted consensus-beating results, according to LSEG data.

Apple surged after the company unveiled a record $110 billion share buyback program and results beat expectations.

Shares of biotech firm Amgen jumped after encouraging interim data on its experimental weight-loss drug MariTide and first-quarter earnings.

Travel platform Expedia cut its full-year revenue growth forecast, sending its shares tumbling.

According to preliminary data, the S&P 500 gained 63.59 points, or 1.26%, to end at 5,127.79 points, while the Nasdaq Composite gained 316.33 points, or 2.00%, to 16,157.29. The Dow Jones Industrial Average rose 450.66 points, or 1.18%, to 38,677.32.