The S&P 500 rose 0.6% on Friday, closing out a second straight week of gains after a surprise drop in July payrolls convinced traders the Federal Reserve can hold interest rates steady in September. Software earnings from Atlassian, Cloudflare and Airbnb added to the rally, while Goldman Sachs' chief economist called the jobs report weaker than the headline numbers suggested.
The S&P 500 climbed 0.6% Friday. Nasdaq Composite outperformed, climbing 1.1%. The Dow Jones Industrial Average added 140 points, or 0.3%. Traders read July's unexpected loss of jobs as a sign the central bank won't need to raise rates soon.
Jobs miss shifts rate-hike odds
Nonfarm payrolls dropped 23,000 in July, far below the gain of 83,000 economists polled by Dow Jones had forecast. The unemployment rate fell to 4.1% even as the labor force participation rate dropped to its lowest level in more than five years.
As a result, a majority of fed funds futures traders now expect the Fed to hold its benchmark interest rate unchanged at the September meeting. The target range stands at 3.50% to 3.75%, per the CME FedWatch tool. Just a day earlier, traders had priced in a 55% chance of a quarter-point hike.
However, Goldman Sachs chief economist Jan Hatzius told CNBC's Squawk on the Street that "if you take the whole report together, it’s weaker", noting his composite measure of underlying job growth fell from roughly 70,000 a month ago to 5,000 now. He added that next week's inflation figures matter more for the Fed's September decision, since they could show whether the strong June inflation reading was a one-off or the start of a softer trend.
Software earnings lift the market
Software stocks led Friday's advance after fresh results eased fears that artificial intelligence would disrupt the industry. Cloudflare popped 6% after issuing a solid full-year and current-quarter outlook. Atlassian jumped 30% after fourth-quarter earnings and revenue beat expectations with upbeat guidance.
Airbnb shares rallied 14% after the vacation-rental company beat top- and bottom-line estimates for its latest quarter. The gains capped a broad weekly rally. The S&P 500 has risen more than 3% week to date. The Nasdaq is on pace for its best weekly performance since April, up around 5%.
Source: CNBC
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