A currency trader passes by the screens showing the Korea Composite Stock Price Index (KOSPI), center, and the foreign exchange rate between U.S. dollar and South Korean won, right, at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Tuesday, Oct. 31, 2023. Asian shares were trading mostly lower Wednesday as investors looked ahead to a week that could see more swings in financial markets, including key reports on U.S. consumer confidence and the job market. (AP Photo/Ahn Young-joon) A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Tuesday, Oct. 31, 2023. Asian shares were trading mostly lower Wednesday as investors looked ahead to a week that could see more swings in financial markets, including key reports on U.S. consumer confidence and the job market. (AP Photo/Ahn Young-joon) A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Tuesday, Oct. 31, 2023. Asian shares were trading mostly lower Wednesday as investors looked ahead to a week that could see more swings in financial markets, including key reports on U.S. consumer confidence and the job market. (AP Photo/Ahn Young-joon) Flags adorn the facade of the New York Stock Exchange, Wednesday, June 16, 2021. Wall Street is retreating a bit more as a five-week rally loses momentum. The S&P 500 was 0.4% lower in early trading Wednesday, June 21, 2023.(AP Photo/Richard Drew, File) People walk past an electronic stock board showing Japan's Nikkei 225 index at a securities firm Wednesday, Nov.1, 2023 in Tokyo. Asian shares were mostly higher Wednesday after Wall Street advanced to claim back some of the ground it gave up in another losing month. (AP Photo/Shuji Kajiyama) People walk past an electronic stock board showing Japan's Nikkei 225 index at a securities firm Wednesday, Nov. 1, 2023 in Tokyo. Asian shares were mostly higher Wednesday after Wall Street advanced to claim back some of the ground it gave up in another losing month. (AP Photo/Shuji Kajiyama) A cameraman films electronic stock board showing Japan's Nikkei 225 index, seen in red, at a securities firm Wednesday, Nov. 1, 2023 in Tokyo. Asian shares were mostly higher Wednesday after Wall Street advanced to claim back some of the ground it gave up in another losing month. (AP Photo/Shuji Kajiyama) A pedestrian passes an electronic stock board showing Japan's Nikkei 225 index, seen in red, at a securities firm Wednesday, Nov. 1, 2023 in Tokyo. Asian shares were mostly higher Wednesday after Wall Street advanced to claim back some of the ground it gave up in another losing month. (AP Photo/Shuji Kajiyama) People pass the front of the New York Stock Exchange in New York, March 21, 2023. Wall Street is retreating a bit more as a five-week rally loses momentum. (AP Photo/Peter Morgan, File) Specialist Dilip Patel, foreground, works with a colleague on the floor of the New York Stock Exchange, Wednesday, Nov. 1, 2023. U.S. stocks are drifting Wednesday as Wall Street waits to hear what will come out of the Federal Reserve's latest announcement on interest rates. (AP Photo/Richard Drew) Trader Michael Capolino, left, works on the floor of the New York Stock Exchange, Wednesday, Nov. 1, 2023. U.S. stocks are drifting Wednesday as Wall Street waits to hear what will come out of the Federal Reserve's latest announcement on interest rates. (AP Photo/Richard Drew) Trader Edward Curran, right, works on the floor of the New York Stock Exchange, Wednesday, Nov. 1, 2023. U.S. stocks are drifting Wednesday as Wall Street waits to hear what will come out of the Federal Reserve's latest announcement on interest rates. (AP Photo/Richard Drew) Trader Michael Milano, right, works on the floor of the New York Stock Exchange, Wednesday, Nov. 1, 2023. U.S. stocks are drifting Wednesday as Wall Street waits to hear what will come out of the Federal Reserve's latest announcement on interest rates. (AP Photo/Richard Drew) Trader John Romolo works on the floor of the New York Stock Exchange, Wednesday, Nov. 1, 2023. U.S. stocks are drifting Wednesday as Wall Street waits to hear what will come out of the Federal Reserve's latest announcement on interest rates. (AP Photo/Richard Drew) Trader Gregory Rowe works on the floor of the New York Stock Exchange, Wednesday, Nov. 1, 2023. U.S. stocks are drifting Wednesday as Wall Street waits to hear what will come out of the Federal Reserve's latest announcement on interest rates. (AP Photo/Richard Drew) Trader Sal Suarino works on the floor of the New York Stock Exchange, Wednesday, Nov. 1, 2023. U.S. stocks are drifting Wednesday as Wall Street waits to hear what will come out of the Federal Reserve's latest announcement on interest rates. (AP Photo/Richard Drew) Trader Federico DeMarco works on the floor of the New York Stock Exchange, Wednesday, Nov. 1, 2023. U.S. stocks are drifting Wednesday as Wall Street waits to hear what will come out of the Federal Reserve's latest announcement on interest rates. (AP Photo/Richard Drew) A television screen shows the rate decision of the Federal Reserve as Specialist Meric Greenbaum works at his post on the floor of the New York Stock Exchange, Wednesday, Nov. 1, 2023. The Federal Reserve kept its key short-term interest rate unchanged Wednesday for a second straight time but left the door open to further rate hikes if inflation pressures should accelerate in the months ahead. (AP Photo/Richard Drew) A television screen shows the rate decision of the Federal Reserve as traders work on the floor of the New York Stock Exchange, Wednesday, Nov. 1, 2023. The Federal Reserve kept its key short-term interest rate unchanged Wednesday for a second straight time but left the door open to further rate hikes if inflation pressures should accelerate in the months ahead.(AP Photo/Richard Drew) A currency trader passes by the screens showing the Korea Composite Stock Price Index (KOSPI), left, and the foreign exchange rate between U.S. dollar and South Korean won, center, at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Thursday, Nov. 2, 2023. Asian shares were mostly higher Thursday after the U.S. Federal Reserve indicated it may not need to pump the brakes any harder on Wall Street and the economy. (AP Photo/Ahn Young-joon) A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Thursday, Nov. 2, 2023. Asian shares were mostly higher Thursday after the U.S. Federal Reserve indicated it may not need to pump the brakes any harder on Wall Street and the economy. (AP Photo/Ahn Young-joon) A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Thursday, Nov. 2, 2023. Asian shares were mostly higher Thursday after the U.S. Federal Reserve indicated it may not need to pump the brakes any harder on Wall Street and the economy. (AP Photo/Ahn Young-joon) People pass the front of the New York Stock Exchange in New York, Tuesday, March 21, 2023. Stocks are rising on Wall Street, including the banks most beaten down by the industry's crisis. (AP Photo/Peter Morgan A currency trader passes by the screens showing the Korea Composite Stock Price Index (KOSPI), left, and the foreign exchange rate between U.S. dollar and South Korean won at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Friday, Nov. 3, 2023. (AP Photo/Ahn Young-joon) A currency watches monitors near the screens showing the Korea Composite Stock Price Index (KOSPI), left, and the foreign exchange rate between U.S. dollar and South Korean won at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Friday, Nov. 3, 2023. (AP Photo/Ahn Young-joon) Currency traders work near the screens showing the Korea Composite Stock Price Index (KOSPI), center, and the foreign exchange rate between U.S. dollar and South Korean won, right, at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Friday, Nov. 3, 2023. (AP Photo/Ahn Young-joon) People walk past the New York Stock Exchange on Wednesday, June 29, 2022 in New York. Wall Street’s best week of the year is getting even better Friday, Nov. 3, 2023, following a cooler-than-expected report on the job market. (AP Photo/Julia Nikhinson)
NEW YORK (AP) — Wall Street steamrolled even higher Friday as it closed out its best week in nearly a year.
The S&P 500 climbed 40.56 points, or 0.9%, to 4,358.34 and rose every day of the week. The Dow Jones Industrial Average gained 222.24, or 0.7%, to 34,061.32, and the Nasdaq composite jumped 184.09, or 1.4%, to 13,478.28.
Stocks surged through the week on rising hopes the Federal Reserve is finally done with its market-crunching hikes to interest rates, meant to get inflation under control. A report on Friday underscored that pressure is easing on inflation after it showed employers hired fewer workers last month than economists expected.
It's a stunning turnaround from just a week ago, when Wall Street was reeling after the S&P 500 had fallen 10% below its high point for the year. That sent Wall Street's main index into what investors call a “correction.”
Since then strong profit reports helped drive some stocks to towering gains. Generac, a maker of backup generators, soared nearly 28% for its best week since its stock began trading in 2010. At Expedia Group, another stronger-than-forecast report sent its stock nearly 22% higher for its best week since the market was surging out of the coronavirus crash in early 2020.
But it was interest rates, yields and inflation that were at the center of all the wild movements for financial markets around the world.
Before this week, stocks had been struggling under the weight of rapidly rising Treasury yields. Those yields were in turn catching up to the Fed’s main interest rate, which is above 5.25% and at its highest level since 2001.
Higher rates and yields slow the economy, hurt prices for investments and raise the risk of something breaking within the financial system, such as the three high-profile U.S. bank failures that rattled financial markets during the spring.
“It was really fear that the Fed was going to go too far,” said Katie Nixon, chief investment officer for Northern Trust Wealth Management.
The Fed put such pressure on the economy intentionally, hoping to starve inflation of its fuel. It wants the job market to cool, particularly pay raises going to workers. The Fed fears too-strong pay gains could create a vicious cycle that keeps inflation high.
Analysts said Friday’s jobs report offered encouraging signals for the Fed, with average hourly earnings rising less in October from September than expected, though it doesn’t mean the job is done.
Treasury yields in the bond market tumbled immediately after the jobs report, releasing more of the pressure that had built up on Wall Street. The yield on the 10-year Treasury eased to 4.52% from 4.67% late Thursday and from more than 5% last week, when it hit its highest level since 2007.
Of course, that sharp fall in yields could also end up hurting investors in the long run. Fed Chair Jerome Powell said this week that the central bank may not need to hike rates any more if the recent rise in yields stays “persistent.” Such high yields could slow the economy and push down on inflation by themselves, without requiring the Fed to hike rates again.
A swift regression in Treasury yields could make the Fed more nervous and encourage it to consider raising rates again. The 10-year yield in just a week eliminated its rise from all of October.
Plus, a slowing job market raises pressure on economic growth, and worries still exist on Wall Street about a possible recession even though the economy is strong at the moment.
Still, a slowing U.S. job market is exactly what investors wanted to see because it could convince the Fed to halt its barrage of hikes to interest rates.
Traders are moving up expectations for when the first cut to interest rates by the Fed could happen, potentially by the summer, according to data from CME Group. Such cuts can act like steroids for financial markets.
For investors around the world, the “Fed matters more than other central banks,” and weak U.S. data is “the only game-changer for markets,” foreign-exchange strategists at Bank of America wrote in a BofA Global Research report.
A separate report on Friday said growth in U.S. services industries, such as finance and construction, was weaker last month than economists expected. The report from the Institute for Supply Management also suggested a slight easing in prices.
Excitement about a potentially easier Fed was more than enough to offset a fall for Apple, which is Wall Street’s most influential stock.
The most valuable U.S. stock fell 0.5% despite reporting stronger profit for the latest quarter than analysts expected. Analysts said investors were likely disappointed with Apple’s forecast for revenue for the last three months of 2023.
On the winning side of Wall Street was Cardinal Health. It rose 6.9% after a better-than-expected profit report
Stocks indexes were mixed in Europe and higher across most of Asia.
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AP Writers Damian J. Troise, Zimo Zhong and Matt Ott contributed.
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