Stocks closed higher on Friday in volatile trade to snap a four-session losing streak as investors wrestled with a mixed jobs report and comments from Federal Reserve officials on the pace of interest rate hikes.
The Dow Jones Industrial Average climbed as much as 600 points on the heels of the closely watched labor market report, before paring gains. The blue-chip index was in negative territory before surging 400 points to close at 32,403, up 1.3%
The S&P 500 and the Nasdaq rose 1.4% and 1.3%, respectively. But all three indexes posted losses for the week.
The jobs report showed an uptick in the unemployment rate in October, indicating some signs of slack may finally be starting to emerge in the job market and give the Fed room to downsize its rate hikes beginning in December.
But the data also showed average hourly earnings rose slightly more than expected, as did job growth, pointing to a labor market that largely remains on firm footing.
Labor market data has been a primary focus for markets as the Fed has repeatedly stated it is looking for some cooling before considering a pause in hikes. Hawkish comments from Fed Chair Jerome Powell on Wednesday increased worries the central bank could keep boosting interest rates for longer than previously expected.
On Friday, Fed officials echoed Powell’s comments about potentially decreasing the size of rate hikes in the future, but needing to continue to raise rates for a longer period of time and potentially above the 4.6% level the central bank penciled in at its September meeting.
“Interest rates and the terminal rate discussion is what is driving market valuations more than anything right now,” said Brian Mulberry, client portfolio manager at Zacks Investment Management in Golden, Colorado.
“Based on the comments today and Chairman Powell’s comments on Wednesday, they are not interested in providing any more liquidity at all so what we’ve seen is simply a clarification around the fact that rates are going higher, and they are going to stay higher for longer, it just might be that the pace of hikes slows incrementally.”
The non-farm payrolls report comes after a conflicting set of data this week that pointed to a slowdown in certain parts of the economy but also underscored the resilience of the US labor market despite aggresive rate hikes to tame inflation.
Traders’ expectations of a 75 basis point rate hike in December had briefly jumped after the jobs report but were now pricing in about a 59% chance of a 50 basis point hike, according to CME’s FedWatch Tool.
Market focus will now turn to a key inflation reading due next week as well as midterm elections on Tuesday, where control of Congress is at stake.