US stocks advance as jobs data dims prospect of Fed rate hike

As per the latest business developments, US stocks rose as slower-than-anticipated job expansion drove traders to dial-back bets that the The US central bank could start raising interest rates as soon as this month.

The S&P 500 Index advanced 0.6% by 9:42 a.m. in New York, rallying from Wednesday’s down session. In the meantime, the technology-heavy Nasdaq 100 Index advanced 0.4%. Shorter-term Treasury yields eased.

The report suggested the labor market still faces some challenges despite signs of resilience in recent months.

“A mixed June employment report signaled moderation in job expansion from May’s accelerated climb, taking the steam out of market expectations for Fed rate hikes by year end,” stated Jennifer Timmerman, senior investment strategy market observer at Wells Fargo Investment Institute.

The pullback in hiring was led by the biggest slide in leisure and hospitality payrolls since 2020, “reflecting weaker than usual seasonal hiring,” according to the Bureau of Labor Statistics. Ahead of the report, some economists were expecting the FIFA World Cup, which kicked off last month, to lift payrolls in the sector.

“Hospitality employment went sharply negative, confirming anecdotal evidence from hoteliers that the World Cup lift was proving to be a fool’s paradise,” stated Brad Conger, chief investment officer at Hirtle & Co.

Interest-rate swaps revealed traders pricing in a less than 20% chance of an gain at the Fed meeting later this month, down from around 33% before the data. Markets are pricing in fewer than two quarter-point rate hikes by March 2027.

The soft jobs report comes a day after Fed Chairman Kevin Warsh stated inflation risks had come down in recent weeks and reiterated his determination to bring the pace back down to the central bank’s 2% target.

“As we are learning how the Fed reaction function will form under Warsh, this print takes some of the pressure off of the inflation fighting institution to hike near term,” stated Bradford Smith, portfolio manager at Janus Henderson Market participants.

Smith noted that moderating oil price inflation and softness on jobs “likely keeps the Fed on hold at least for the next meeting.”

In terms of single stock moves, Adobe Inc. advanced after the software firm was upgraded to buy from hold at HSBC. Palantir Technologies Inc. rose as DA Davidson boosted its recommendation to buy from neutral.