Stock market today: Stocks tick up as Wall Street weighs whether economy is too warm or just right

NEW YORK (AP) — Stocks rose Friday after a report showed the U.S. labor market is not slowing as much as expected.

The S&P 500 rose 0.4% in late trading and came close to extending its weekly winning streak to six. The Dow Jones Industrial Average was up 142 points, or 0.4%, as of 3 p.m. ET, and the Nasdaq composite was up 0.5%.

Yields rose more sharply in the bond market following the report, which said U.S. employers added more jobs last month than economists expected. Workers' wages also rose more than expected and the unemployment rate improved unexpectedly.

The strong data kept concerns about a possible recession at bay, at least for a while longer, and shares of some companies whose profits are closely tied to the strength of the economy were rising. Energy-related stocks had the biggest gain of the 11 sectors that make up the S&P 500, rising 1% as oil prices rose amid hopes of stronger fuel demand.

Carrier Global added 4.2%, one of the market's biggest gains, after it said it had agreed to sell its security business, Global Access Solutions, to Honeywell for $4.95 billion.

But the worry on Wall Street is that the remarkably resilient labor market could also end up giving more fuel to inflation. That could push the Federal Reserve to raise its main interest rate further or at least keep it at its highest level since 2001 for longer than expected.

That, in turn, could dilute the core hope that helped stocks recently rise to their best levels since March 2022: Inflation has fallen enough from its peak two summers ago for the Federal Reserve to finally stop its increases. interest rates and start cutting them next year.

"The Fed is so afraid of 'giving up before the job is done' that it will err and overdo it," said Brian Jacobsen, chief economist at Annex Wealth Management.

Overall, the employment data looked decent, Bank of America economists said in a BofA Global Research report. They said the figures support their expectation “that economic activity will slow, not collapse.”

The 10-year Treasury yield rose to 4.25% from 4.15% late Thursday. It had been in an overall decline and easing pressure on stocks since breaking above 5% in October and hitting its highest level since 2007.

The two-year Treasury yield, which more closely tracks expectations for the Federal Reserve, rose to 4.74% from 4.60%, as traders pulled back bets on how many times the Fed could cut rates in 2024.

High rates and returns hurt all types of investments, and particularly affect stocks considered the most expensive or that require their investors to wait a long time for big growth.

Google's parent company, Alphabet, fell 1.3% and was the biggest weight on the S&P 500. A day earlier, it had jumped amid excitement over the launch of its latest artificial intelligence offering. Other Big Tech stocks were stronger, with Nvidia, Apple and Microsoft rising.

RH also lost the game. The home furnishings company plunged 13.5% after reporting results for the latest quarter that were weaker than analysts expected.

Friday's jobs report is one of the last major data the Federal Reserve will receive before announcing its next move on interest rates on Wednesday. The next one will be on Tuesday, when the US government gives its latest monthly update on how high inflation is for US consumers.

The widespread expectation remains that the Federal Reserve will keep its main interest rate stable next week, according to data from CME Group. But traders are now betting on a less than 46% chance that the Federal Reserve will have cut rates by March. That's down from nearly 65% ​​the day before.

Another preliminary report on Friday offered more encouragement. He said U.S. consumers' inflation expectations for next year fell to 3.1% from 4.5% the previous month, the lowest level since March 2021. The Fed has said it pays close attention to such expectations. , fearing that an increase could lead to a vicious cycle that keeps inflation high.

The preliminary report from the University of Michigan also said confidence among consumers strengthened enough to erase all of its declines from the previous four months, mainly due to improved inflation expectations.

In the oil market, crude oil prices rose to recover some of the heavy losses of recent months. The benchmark US oil barrel gained $1.89 to settle at $71.23, although it is still more than $20 below its level in September. It has been falling on concerns that demand from the global economy is not strong enough to absorb all the world's available supplies.

Brent crude, the international standard, rose $1.79 to $75.84 a barrel.

In foreign stock markets, indices were mostly higher in Europe and mixed in Asia. The Nikkei 225 fell 1.7% for the second consecutive drop amid speculation over whether the Bank of Japan will ease its ultra-loose policy on interest rates.

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AP business writer Zimo Zhong contributed.

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