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Business

Dow has best day of 2023, surging 700 points on strong jobs report, debt deal

By
Reuters
Published June 2, 2023
Updated June 2, 2023, 4:17 p.m. ET

Stocks soared on Friday on Friday after a labor market report showing moderating wage growth in May indicated the Federal Reserve may skip a rate hike in two weeks, while investors welcomed a Washington deal that avoided a catastrophic debt default.

The Dow Jones Industrial Average had its best day of 2023, jumping 701 points, or 2.1%, to 33,762.76, the Nasdaq climbed 1.1% and the S&P 500 gained 1.5%.

The tech-heavy Nasdaq index touched its highest intraday level in over 13 months and posted for its sixth straight week of gains, its best streak since January 2020.

The Labor Department’s closely watched employment report showed unemployment rate at 3.7% in May against a forecast of 3.5%, while average hourly earnings were at 0.3%, down from 0.4% in April, highlighting a cooling in wage inflation.

Non-farm payrolls increased by 339,000 jobs vs. expectations of 190,000 additions.

“While it appears to be a hot number on the actual number of people employed, the wage rate is not increasing as fast,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh. “That is a softening effect and is this the mythical soft landing? Looks like that.”

Traders work on the floor of the New York Stock Exchange
The tech-heavy Nasdaq index touched its highest intraday level in more than a year. REUTERS

“This is a reflection of a labor market that, while still robust, is softening gently, not rapidly. That’s exactly what the Fed would like to see,” said Art Hogan, chief market strategist at B Riley Wealth in New York.

“The Fed wants to tame inflation without crushing the jobs market, and this is another piece of evidence that they’re actually well along their way to getting that accomplished.”

The data brought relief to investors who now expect the Fed to skip an interest rate hike this month for the first time since starting its aggressive policy tightening more than a year ago.

Fed funds futures trading showed an over 70% probability that the Fed will hold interest rates steady at its June 13-14 policy meeting. 

Also lifting the mood, the Senate passed a bill late on Thursday to lift the government’s $31.4 trillion debt ceiling, avoiding a catastrophic, first-ever default.

Amazon gained 1.2% after a report that the company is in talks with telecom operators to offer low-cost mobile services in the US.

Telecom operators including Verizon Communications, T-Mobile US and AT&T fell between 3.2% and 5.6%, while Dish Network jumped 16%.