Stocks rise slightly, Treasury yields soar after jobs data

NEW YORK

Stocks posted modest gains and Treasury yields rose on Wall Street on Friday after a healthy U.S. labor market report bolstered expectations for upcoming interest rate hikes.

The S&P 500 rose 0.3% after bouncing between small gains and losses. The benchmark index made a small gain for the week, the third in a row amid lingering concerns over high inflation, higher Federal Reserve interest rates and economic effects of the war in Ukraine.

The Dow Jones Industrial Average rose 0.4% and the Nasdaq composite rose 0.3%. Small company stocks outperformed the broader market, pushing the Russell 2000 up 1%.

The sharpest action was again seen in the bond market, where the yield on two-year Treasury bills approached its highest level in more than three years.

Yields jumped after a US government report showed employers added 431,000 jobs last month. That was slightly below economists’ expectations for 477,500, but the report also revised data from previous months to reflect more strength. It showed increases for workers accelerated last month, but at a slower pace than headline inflation, while the jobless rate improved to 3.6% from 3.7%.

“It was a strong report,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments.

“You can see the concerns about COVID fading away. Fewer people are working remotely. Fewer people say they can’t work due to the pandemic.

A separate report showed that US manufacturing continues to grow, albeit at a slower pace than in February.

A strong job market and economy gives the Federal Reserve more leeway to raise interest rates sharply to combat the high inflation that is sweeping the country. The Fed has already raised its overnight rate once, the first such increase since 2018. Following Friday’s jobs report, traders increased bets that the Fed will raise rates when of its next meeting double the usual amount.

These expectations are boosting short-term Treasury yields in particular, and the two-year yield jumped to 2.45% from 2.28% on Thursday evening.

The two-year yield again exceeded the 10-year yield, which was also climbing, but less rapidly. The 10-year yield fell from 2.33% to 2.38%. On Tuesday, the two-year yield briefly topped the 10-year yield for the first time since 2019, a potentially worrying sign.

Such a reversal of the usual relationship between two- and 10-year yields has preceded many recessions in the past, although it has not been a perfect predictor. Some market watchers warn that the signal could be less accurate this time around, due to yield distortions caused by extraordinary moves by the Federal Reserve and other central banks to keep interest rates low.

Shares of more than 65% of companies in the benchmark S&P 500 rose, with healthcare and communications stocks accounting for much of the gains. A fall in industrial, technology and financial stocks limited the index’s gains.

In total, the S&P 500 rose 15.45 points to 4,545.86. The Dow Jones added 139.92 points to 34,818.27, while the Nasdaq rose 40.98 points to 14,261.50. The Russell 2000 gained 20.99 points at 2,091.11.

GameStop shares initially rose sharply after announcing plans to split its shares, pending shareholder approval for an increase in its authorized share count. Such splits can depress the price of a stock, potentially putting it within reach of smaller investors. The stock lost its gains, however, and closed down 0.9%.

GameStop’s stock has more than doubled since it was at $78.11 in mid-March. But it’s still well below the high of $483 reached in early 2021 amid the “meme stock” craze. Then, groups of investors with smaller pockets came together to drive prices up to levels considered irrational by many professional investors.

Other meme stocks have also shown renewed strength in recent weeks, though AMC Entertainment fell 5.4% on Friday.

In overseas markets, European stocks edged higher despite a report showing that consumer prices in the 19 countries that use the euro rose 7.5% in March, the fifth consecutive monthly record.

The French CAC 40 rose 0.4%, the German DAX gained 0.2% and the FTSE 100 in London gained 0.3%.

Oil and gas prices had already risen due to growing demand from economies recovering from the depths of the COVID-19 pandemic. They surged after Russia, a major oil and gas producer, invaded Ukraine over fears that sanctions and export restrictions could jeopardize supplies.

Crude prices fell slightly on Friday, with a barrel of U.S. oil plunging 1% to settle at $99.27. Early last month, when crude supply disruptions were at their worst, it briefly touched $130.

Brent crude, the international standard, slipped 0.3% to settle at $104.39 a barrel.

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AP Business Writer Yuri Kageyama contributed. Veiga reported from Los Angeles.