US Markets

Dow jumps 94 points to close out winning week after much better-than-expected jobs report

Key Points
  • The major indexes eked out weekly gains after the Labor Department said 222,000 jobs were created in the U.S.
  • Wage growth rose by just 0.2 percent, however, raising some questions about U.S. inflationary pressures.
Dow closes out winning week after better-than-expected jobs report
Dow closes out winning week after better-than-expected jobs report

U.S. stocks closed higher on Friday on the back of stronger-than-expected employment data.

The Dow Jones industrial average rose 94.30 points to close at 21,414.34, with McDonald's contributing the most gains. The 30-stock index briefly traded more than 100 points higher. The S&P 500 rose 0.6 percent to 2,42518, with information technology leading advancers. The Nasdaq composite outperformed, advancing 1.04 percent to 6,153.08.

Major U.S. Indexes

The U.S. economy added 222,000 jobs in June, the Labor Department said. Economists polled by Reuters expected an increase of 179,000. The unemployment rate ticked higher to 4.4 percent from 4.3 percent. Wage growth — which is viewed as a measure of inflation — rose by just 0.2 percent, however.

"This was a hot number," said JJ Kinahan, chief market strategist at TD Ameritrade. But "the stock market's reaction [had] been tempered by the wage-growth numbers" immediately after the data were released, he said.

Investors paid attention for the wage growth data as the Federal Reserve is expected to raise interest rates once more this year. The central bank also intends to unwind its massive $4.5 trillion balance sheet.

"If we're going to have wage growth, it's got to come from somewhere. Either from employees being worth more to employers or through lower profit margins," said Jason Thomas, chief economist at AssetMark.

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters

Treasury yields held mostly higher after Labor Department's release. The benchmark 10-year yield hovered around 2.39 percent. The two-year yield, which is the more sensitive to changes in monetary policy, traded near 1.40 percent.

The U.S. dollar whipsawed against a basket of currencies, alternating between gains and losses.

"Nothing here is going to dissuade the Fed from its rate hiking cycle though," said James Athey, senior investment manager at Aberdeen Asset Management. "With unemployment below 4.5 [percent], the jobs market is the least of the Fed's worries. There's a new hawkish mood that's rippling through bond markets and causing a sell-off. Today won't do much to halt that."

The major indexes eked out weekly gains despite the tech sector facing pressure from rising interest rates. Tech has been the best-performing sector this year, rising 15.6 percent. Sovereign bond yields have spiked around the world amid hawkish rhetoric from major central banks.

Heading into next week, investors will watch out for releases of major quarterly reports. Citigroup, Wells Fargo and JPMorgan Chase are all scheduled to report second-quarter results.

"Currently earnings are expected to grow 6.2 percent, but we wouldn't be surprised to see growth of more than 9 percent," said Lindsey Bell, investment strategist at CFRA. She also said tech earnings could be a pleasant surprise for investors.

"I wouldn't count tech out just yet," Bell said. "I think the reporting period will remind investors that the fundamentals are still there."

Quarterly results helped lift the broader market in the previous quarter. S&P 500 earnings grew by more than 10 percent for the first quarter.