U.S. stocks rallied on Friday as investors digested the Labor Department’s closely watched April jobs report, which showed the U.S. labor market remains strong but that growth is moderating. That gave investors hope that the Fed may pause its interest rate hikes at its meeting next month.
The economic data caps off a busy week for investors, which saw the Federal Reserve once again raise interest rates by another 0.25% as key earnings from companies like Apple (AAPL), Starbucks, (SBUX) and Ford (F) came in mostly positive for the quarter.
The flight to traditional “safe haven” assets like gold (GC=F) eased on Friday following heightened upheaval within the regional banking sector — about two months since the stunning collapse of Silicon Valley Bank, which trigged a ripple effect across the entire financial system.
On Thursday, regional bank stocks including PacWest Bancorp (PACW), Western Alliance Bancorporation (WAL), and Zions (ZION) all saw double-digit declines amid reports PacWest was seeking strategic options, including a potential sale or capital raise. That, coupled with the purchase of First Republic by JPMorgan Chase (JPM) still fresh in the minds of investors, contributed to heavy losses within the sector.
However, those stock moves reversed at Friday’s open, with PacWest, Western Alliance, and Zions seeing gains of about 80%, 38%, and 18%, respectively.
WTI crude oil (CL=F) and Brent crude (BZ=F), which saw prices tumble in the wake of the Fed decision and other cost pressures like a rise in U.S. gasoline inventories, gained to trade around $71.09 and $75.03 a barrel, respectively.
Investors continue to digest the Federal Reserve’s rate hike decision earlier this week as Fed Chair Jerome Powell suggested the central bank could pause its rate hikes but still left the door open for more rate increases down the line.
“A decision on a pause was not made today,” Powell said during Wednesday’s press conference, although he did note, “There’s a sense that we’re … much closer to the end of this than the beginning.”
Friday’s jobs report, particularly surrounding the strong pace of wage growth, will be a key factor when it comes to future Fed rate policy.
Nonfarm payrolls rose by 253,000 in April with the unemployment rate falling to 3.4%. Economists surveyed by Bloomberg expected the U.S. economy to have added 185,000 nonfarm payroll jobs last month with the unemployment rate ticking marginally higher to 3.6%.
Average hourly earnings also topped expectations, rising 4.4% year-on-year versus the expected 4.2%.
Employment gains in March were revised lower to show 165,000 jobs were created during the month, 71,000 fewer than previously reported. February’s job gains were also revised lower — to 248,000 from 326,000.
JPMorgan Chase economist Michael Feroli said in a research note that “with the revised data in hand the trend in labor market activity looks to be gradually cooling, albeit punctuated by a month of strength in April. We still think this Wednesday’s hike was the last of the cycle, though we wouldn’t rule out one final hike at the June meeting.”
Friday’s jobs data comes after weekly initial jobless claims surpassed expectations. According to the report, released on Thursday, 242,000 jobless claims were filed, an increase of 13,000 from the previous week’s revised level.
Friday afternoon’s top trending stocks
Block (SQ) traded relatively flat despite beating earnings on both the top and bottom lines. The company also boosted its full-year outlook as its popular Cash App payments platform continues to drive growth.
Shopify (SHOP) moved higher in afternoon trading, up 7%, after climbing nearly 24% on Thursday. The e-commerce company announced a massive strategic shift, revealing it will sell its logistics business and lay off 20% of its workforce.
Carvana (CVNA), which surged roughly 40% at the open, pared gains to about 26% in mid-afternoon trading after losses narrowed and revenue topped estimates. The online used car retailer has been on a massive cost cutting campaign after a terrible 2022 for investors.
DraftKings (DKNG) rose more than 16% on Friday following strong earnings. The company raised its 2023 revenue guidance, now expecting full-year revenue to easily surpass $3 billion for the first time.
Paramount Global (PARA) bounced back slightly from its massive sell-off, trading above 1% on Friday, after closing Thursday’s session down a whopping 28%. The company, which missed earnings expectations on both the top and bottom lines, continues to battle advertising headwinds and greater losses within its streaming division. The media giant also updated its dividend policy, cutting its quarterly cash dividend to $0.05 per share from $0.24 a share.
Warner Bros. Discovery (WBD), which reported earnings before the bell on Friday, reversed earlier losses to climb about 3% after earnings missed estimates. The media giant swung to a $50 million streaming profit, saying it now expects its U.S. direct-to-consumer business to be profitable this year.