Wall Street closed a week of mostly choppy trading with broad profits on Friday, squeezing the S&P 500 to its second consecutive weekly profit.
The S&P 500 rose 0.9% to end the week up 0.6%. Technology stocks were the biggest winners and did the biggest thing in propelling the broader market higher. Microsoft grew by 2.1% and Apple by 1.9%. Communications stocks and companies that rely on consumer spending also performed solidly. Only utilities closed lower.
The S&P 500 rose 37.04 points to 4,229.89 points. The Dow Jones Industrial Average gained 179.35 points, or 0.5%, to 34,756.39 points. The rally in technology stocks helped the Nasdaq see solid gains. The tech-heavy index climbed 199.98 points, or 1.5%, to 13,814.49 points.
Smaller company stocks also rose. The Russell 2000 added 7.16 points, or 0.3%, to 2,286.41 points.
The rally followed a report by the Department of Labor that US employers created 559,000 jobs in May. That is an improvement on the sluggish rise in April, but below the forecasts of economists. Still, the lower-than-expected increase in jobs for the Federal Reserve may have opened the door to sustaining economic support efforts, including monthly bond purchases to keep interest rates low.
“When you see employment numbers like today, which was slightly disappointing, market participants would be confident that the Fed will stay on track and keep rates low for an extended period of time,” said Clinton Warren, global investment specialist at JP. Morgan private bank.
The increase in jobs last month is another sign that the economy is continuing to recover, even if employment remains relatively shaky and struggling to get back to pre-pandemic levels.
The job report showed that companies are still struggling to find enough workers as the economy quickly recovers from the recession caused by the pandemic. People are either looking for better jobs than they did before the pandemic, retiring early, worrying about childcare, or otherwise taking time off the job market.
Bond yields fell. The 10-year government bond yield fell to 1.55% from 1.62% late Thursday. The slump helped propel tech stocks higher. Lower interest rates generally help stocks because they can turn some investors away from low-interest bonds and move to riskier investments. Stocks that look the most expensive in terms of earnings, such as tech companies, can be among the biggest beneficiaries.
Investors were concerned that rising inflation will become a long-term problem, rather than the temporary effect of the recovering economy. They are also concerned that the Fed may consider withdrawing support for the economy if inflation gets too hot.
Inflation has already risen across the economy, with prices rising for everything from used cars to restaurant meals. Employers also have a harder time attracting workers, which could force them to raise wages, which also increases inflation.
The contrast between signs of higher inflation and a still recovering labor market has made it difficult for investors to gauge what the Fed will do next.
“That’s why the market was constrained in such a tight band of turns for the last week but year-round,” Warren said.