U.S. Stocks Hit New Highs Amid Mixed Job Market Data
NEW YORK — U.S. stocks reached new records on Friday, driven by a complex report on the job market that might be leading to a change in interest rate expectations. The Federal Reserve seems open to adjustments, but no definitive moves have been made.
The S&P 500 gained 0.6%, eclipsing its previous all-time high from earlier in the week. The Dow Jones Industrial Average rose by 237 points, or 0.5%, setting a record, while the Nasdaq Composite Index edged up 0.8%.
This uptick followed a report from the U.S. Labor Department indicating that job growth in December was lower than economists anticipated. However, the unemployment rate improved, which suggests that the job market might be stabilizing. This could hint that a recession might be avoidable.
In a notable move, Vistra, a power company, saw its stock surge 10.5% after it secured a 20-year electricity supply contract with Meta Platforms involving three nuclear power plants. This trend reflects a broader pattern among major tech companies, who are increasingly making such deals to power their data centers and support the shift towards artificial intelligence technology.
Oklo also rose by 7.9% after it announced a partnership with Meta to help secure nuclear fuel for its facility construction project in Pike County, Ohio.
In the housing sector, stocks rallied following President Trump’s announcement to lower mortgage rates, reminiscent of past Federal Reserve actions. Builders FirstSource saw a 12% spike, making it one of the biggest gainers in the S&P 500. Among home builders, Lennar increased by 8.9%, DR Horton by 7.8%, and Pulte Group by 7.3%.
However, General Motors experienced a 2.7% drop after revealing it would face a significant financial setback, around $6 billion, due to complications surrounding its electric vehicle strategy. The firm stated that this was primarily due to decreased tax incentives and relaxed fuel emission standards affecting EV demand.
WD-40’s stock fell 6.6%, attributed to weaker-than-expected earnings in the latest quarter. Its CFO explained that this was mostly timing-related rather than a sign of decreased demand, reaffirming the company’s financial forecasts for the coming year.
Overall, the S&P 500 climbed by 44.82 points to close at 6,966.28. The Dow advanced by $237.96, reaching $49,504.07, while the Nasdaq Composite rose by $191.33 to finish at $23,671.35.
In the bond market, yields were mixed. The improvement in the unemployment rate led traders to temper expectations for an imminent interest rate cut by the Federal Reserve, with the likelihood now at just 5%, a reduction from 11% the previous day. Nonetheless, traders still anticipate that the Fed will lower rates at least twice next year.
That prediction carries certain risks for financial markets. While lower interest rates may stimulate the economy and elevate investment prices, they could also heighten inflation, which remains troublingly above the Fed’s target of 2%.
“Until clearer data emerges, the Fed’s position is likely to remain unchanged,” remarked Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “Interest rates may be cut this year, but the market will likely need to exhibit some patience.”
The yield on the 10-year U.S. Treasury note dipped from 4.19% to 4.16%, generally reflective of long-term economic growth and inflation projections. Meanwhile, the two-year Treasury yield, more indicative of the Fed’s short-term interest rate predictions, increased to 3.53% from 3.49%.
A separate report released Friday indicated that consumer sentiments in the U.S., especially among low-income households, are improving. Notably, the University of Michigan’s preliminary findings suggested inflation expectations for the next year could be at their lowest in a year, potentially giving the Fed more flexibility in terms of interest rate adjustments.
Optimism regarding lower interest rates and a strengthening economy has fueled recent rallies in other stock market sectors, particularly among small-cap stocks in the Russell 2000, which surged 4.6% this week, outperforming the S&P 500’s 1.6% increase.
Internationally, stock markets were predominantly up, with indexes in most regions of Europe and Asia advancing. France’s CAC40 index rose by 1.4%, while Japan’s Nikkei jumped by 1.6%, marking some of the largest gains globally.
