Wall Street’s major indices traded higher on Friday after the latest jobs report signaled that the stubbornly tight labor market may be losing some steam, while Amazon’s (AMZN) stellar earnings report offset Apple’s (AAPL) decline.
The Nasdaq Composite (COMP.IND) gained 0.9%, while the S&P 500 (SP500) and Dow (DJI) were up 0.6% each. However, all three indices are on track to end the week lower.
Nonfarm payrolls in July added 187K jobs, fewer than the 200K expected, indicating a continued slowdown in job gains. But average hourly earnings growth stayed steady, rising 0.4% M/M, ahead of the 0.3% expected. On a Y/Y basis, AHE gained 4.4% Y/Y, compared with 4.2% consensus.
“The employment report came fairly close to expectations and is by no means a scene changer,” said 2V Research’s Gerard MacDonell. “It is consistent with a labor market that is gradually slowing, if not necessarily cooling much, in a lagged response to the earlier weakness of aggregate demand growth.”
While the Federal Reserve wants to see a slower pace of job creation, it doesn’t want to see wages remaining elevated. MacDonell said the wages data tilts marginally hawkish. “Wage growth appears to be stabilizing at a somewhat too high pace.”
Rates were lower, with the 10-year Treasury yield (US10Y) down 11 basis points to 4.08% and the 2-year yield (US2Y) down 8 basis points to 4.82%. Although the 2s10s curve “remains deeply inverted, this is the least inverted since May,” said Deutsche Bank’s Jim Reid.
Amazon (AMZN) and Booking Holdings (BKNG) boosted the S&P 500 index after both companies posted strong results.
Amazon (AMZN) surged 11% as its results were bolstered by cost optimization efforts. “The quarter was impressive, with AWS revenue trends stabilizing and retail gaining operating efficiency,” said Mizuho’s James Lee.
On the other hand, Apple (AAPL) fell 3% after it provided conservative forecast, raising concerns of continued sales pressure. J.P. Morgan said even though investors may “fret” at the hint of modestly weaker-than-expected guidance, it does not change Apple’s (AAPL) overall trajectory.
Eight out of the 11 S&P sectors were trading in the green, led by Consumer Discretionary. Consumer Staples were weighed down by Monster Beverage (MNST), which fell 3% after a weak earnings report.
Cybersecurity stocks were dragged down by Fortinet (FTNT), which sank 24% after an alarming guidance cut.