By: Ella Koeze·Data delayed at least 15 minutes·Source: FactSet Wall Street snapped its losing streak on Friday after a surprisingly good reading on the American job market refocused investor attention on the brightening outlook for economic growth.
Shortly before 3 p.m. the S&P 500 was up 1.6 percent, more than reversing the previous session’s 1.3 percent tumble and putting the index on track for a slight gain for the week after two consecutive weeks in the red.
The rise came after new data showed that the pace of hiring picked up in the United States in February, when the economy created 379,000 new jobs. Parts of the economy that were hard-hit by the Covid crisis — such as leisure and hospitality — bounced back during the month.
The report also contained indications that parts of the economy remained troubled. For instance, the broadest measure of unemployment remained unchanged at 11.1 percent.
“Today’s February jobs report showed that the US labor market is beginning to heal,” wrote economists from Bank of American in a client note on Friday. “However, the preponderance of labor market indicators suggests there is still work to be done.”
The afternoon rally came after a rocky start to the day, with stocks swinging between gains and losses and back again as investors also considered another rise in government bond yields.
That jump in yields has spooked stock investors recently, and on Friday the 10-year yield climbed as high as 1.62 percent immediately after the jobs report, reaching a level not seen since before the coronavirus pandemic. That rate had fallen as low as 0.52 percent over the summer as investors worried about the long-term prospects for the economy.
Investors are betting that a robust economic recovery accompanied by a large stimulus plan might lead to higher prices. After a long stretch of low inflation, there are worries that if high inflation re-emerged, central banks would struggle to control it. This would be bad for bonds, and investors have been sold them off over the past few weeks.
But the pace of the sell-off and rise in yields has caught many by surprise. Higher rates can be a drag on the stock market’s performance because they make owning bonds more attractive, coaxing at least some dollars out of the stock market. Higher rates can also make borrowing more expensive for companies, especially smaller ones that have potential but lack a track record of profitability.