U.S. stocks rose on Friday after December employment data showed wage growth slowed last month, while a closely watched manufacturing report showed a contraction in the services sector. Investors took the releases as a sign that Federal Reserve officials may ease their campaign to raise interest rates.
The S&P 500 (^GSPC) jumped 1.7%, while the Dow Jones Industrial Average (^DJI) added 550 points, or about the same percentage. The tech-heavy Nasdaq Composite (^IXIC) advanced 1.5%. All three major averages were on track to end the first week of 2023 with losses before Friday, but the indices will finish in positive territory if the momentum holds.
The Labor Department’s final 2022 jobs report showed the U.S. economy added 223,000 payrolls last month, while the unemployment rate fell to 3.5 percent. Economists had expected readings of 200,000 and 3.7%, respectively.
Employment has eased in recent months, but hiring remains important despite the Federal Reserve’s efforts to rein in a tight labor market that is putting pressure on wages and contributing to stubborn inflation.
“With more than 1.8 job vacancies for every jobless, investors should expect higher interest rates for longer after today’s release,” Lazard chief market strategist Ron Temple said in a note. “As long as the labor market remains this tight, the Fed cannot be certain that inflation will return to its 2% target.”
The ISM non-manufacturing PMI fell below the 50 mark for the first time since the pandemic began two years ago. A gauge of US services activity fell to 49.6 last month from 56.5 in November. Economists polled by Bloomberg had expected a print of 55.0.
Beleaguered Tesla ( TSLA ) pared losses as much as 7% earlier in the session after the electric car maker cut prices in China following a drop in December shipments.
The starting price for the Model 3 was cut to 229,000 yuan, or about $33,000, while Model Y prices were cut to 259,900 yuan, or $37,886, according to Tesla’s website.
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In other markets, shares of World Wrestling Entertainment (WWE) jumped 23% after The Wall Street Journal reported that former CEO Vince McMahon will return to explore the possibility of selling the business. McMahon retired in July 2022 following a misconduct investigation.
Bed Bath & Beyond ( BBBY ) fell another 18% Thursday morning after revealing in a statement the previous day that the company is exploring bankruptcy as it runs out of cash. Shares fell 30% on Wednesday after the announcement.
Shares of Costco ( COST ) rose more than 7%, coming off a six-month low after the wholesaler posted upbeat December sales data. Revenue last month was $23.8 billion, up 7% year-over-year, while total comparable-store sales rose 5.5%, beating analysts’ expectations of 5%. Costco was Yahoo Finance’s Company of the Year.
In commodity markets, oil prices rebounded on Friday morning after a dismal start to the year that saw crude futures fall as much as 10% this week. West Texas Intermediate (WTI) crude, the U.S. benchmark, rose 1.8 percent to around $75 a barrel at midday.
A trader works on the trading floor of the New York Stock Exchange (NYSE) in New York, U.S., January 5, 2023. REUTERS/Andrew Kelly
Outside of the main monthly jobs report, a range of other labor market updates this week suggest that hiring remains strong and vacancies are still large. For investors, the numbers suggest that labor conditions remain tight enough for the Federal Reserve to keep raising interest rates, sending stocks lower.
In the previous trading session, all three major averages lost more than 1% after the ADP National Employment report showed private payrolls rose by 235,000 jobs in December, while jobless claims fell to a record low since September.
“Last year was the Fed vs. the markets — they needed ratings to go down, they wanted stocks to go down, they wanted bonds to go down, they wanted housing prices to go down — they got it,” David Waddle, CEO of eponymous firm Waddell and Associates told Yahoo Finance Live on Wednesday. “This year is going to be the Fed versus the employers, and what the Fed said to the employers is, ‘We’re not going to stop until you lay off two million people.’
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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