US Stocks Climb While Jobs Data, Earnings Digested

Investors took the strong jobs showing as a reason for the Federal Reserve to move quickly as it starts to raise interest rates this year.

Stocks on Wall Street rose on Friday, as an unexpectedly strong jobs report scrambled investors’ expectations for coming interest rate increases and as the latest round of earnings reports offset some fears about declining corporate profits.

The S&P 500 climbed half a percent, a day after its steepest one-day drop in nearly a year. The index ended the week with a gain of 1.6 percent. The Nasdaq composite rose 1.6 percent on Friday.

Markets were initially unsteady after the government reported that U.S. employers added 467,000 jobs in January, well over expectations for an increase of about 125,000 jobs. The Labour Department also revised hiring numbers for the previous two months sharply higher.

Economists had cautioned against reading too much into Friday’s report, noting that the data was collected in the first weeks of the year, when coronavirus cases reached 800,000 a day, and that quirks in the data might skew the results.

But investors took the strong showing as a reason for the Federal Reserve to move quickly as it starts to raise interest rates this year. The Fed has already cited the strong job market as a reason for it to shift its focus to fighting inflation and made clear that its path forward would be determined by the economic data.

Stocks have had a volatile start to the year as traders prepare for those rate increases. As inflation climbs quickly, investors are questioning how fast and how high rates will rise. The first increase could come as soon as next month, policymakers signaled in late January.

The report underscores an incredibly strong economy. The Federal Reserve now is on solid ground, and we think they will raise rates six times in 2022. This is just one more reason for the Fed to continue to tighten policy this year.

The reaction was most evident in the bond market, where yields on government bonds jumped after the report. The yield on 10-year Treasury notes rose to 1.93 percent from 1.82 percent, while those on 2-year notes jumped to 1.31 percent, the highest since February 2020.

Shares of Amazon jumped 13.5 percent after the company said on Thursday that its revenue rose to a record $137.4 billion in the final three months of the year. Amazon also announced that it would raise the annual price of its Prime shipping club for the first time since 2018 to $139, from $119.

Meta, the parent company of Facebook, fell about 0.3 percent on Friday, a day after it plunged more than 26 percent. Meta’s drop came after it said Facebook had lost users and that a privacy change by Apple last year would cost it advertising dollars this year.

Other social media stocks fared better on Friday, rebounding from a drop the day before. Snap jumped 58.8 percent, rebounding from a more than 23 percent loss on Thursday, after the company reported its first quarter of profits, earning $22.5 million in the last three months of 2021. Twitter, which reports its earnings next week, climbed 7.2 percent.

Shares of large banks also edged higher after the jobs report gave investors more certainty about the prospects of interest rate increases. Lenders stand to reap higher profits as interest rates on loans rise, and Bank of America, JPMorgan Chase, Goldman Sachs and Citigroup were all higher.

Investors will be laser-focused next week on fresh inflation data. On Thursday, the Labour Department will publish its gauge of consumer prices for January. The Consumer Price Index rose at the fastest rate since 1982 in December.

More major companies, including Disney and Coca-Cola, will report their financial performance for the last three months of 2021. So far, just over half of the companies in the S&P 500 have reported their quarterly earnings reports, with 76 percent of those beating estimates.