NEW YORK (AP) – Treasury yields rise on Friday and stock indexes hold close to their all-time highs on Wall Street after a report showed the US labor market is improving broadly.
The S&P 500 was virtually unchanged after the first half hour of trading, a day after hitting a new all-time high. The Dow Jones Industrial Average was up 92 points, or 0.3%, at 35,156 at 10 a.m. EST, and the Nasdaq composite was down 0.4%.
One of the most marked actions has occurred in the bond market, where Treasury yields tend to move with expectations for the economy and inflation. The 10-year Treasury yield climbed to 1.28% from 1.21% on Thursday night, recouping all the losses it suffered over the past week.
Yields surged as economists said on Friday encouraging job report will give the Federal Reserve another push to scale back its bond buying program, which tries to boost the economy by keeping long-term rates low. Economists believe that an announcement from the Fed on a possible slowdown in purchases could come as soon as the end of the month.
Friday’s jobs report showed hiring was stronger than economists had expected, with employers adding 943,000 workers to their payrolls. Average wages also jumped 4% in July from a year earlier, more than economists had expected.
Most stocks on Wall Street rose on the report, with companies with earnings most closely tied to a strong economy leading the way.
Power producers and financial firms in the S&P 500 each grew by at least 1%. The smaller Russell 2000 stocks rose 0.3%, more than their bigger rivals.
But better-than-expected economic data has gained momentum in tech stocks, which have been among Wall Street’s biggest winners since the pandemic.
They were the big beneficiaries of the ultra-low interest rates that the Federal Reserve introduced. When bonds earn little interest, investors are willing to pay higher prices for other types of investments, especially stocks of companies that are expected to grow earnings in the distant future.
A rise in interest rates could undermine these stocks, or at least add a headwind that has been largely absent for over a year. A slowdown in bond purchases by the Fed would be the first step towards raising short-term interest rates from their all-time low of near zero.
This is why the Nasdaq struggled more than the indices on Friday. This is also why the benchmark S&P 500 was only making apathetic movements, even though three out of five stocks within the index were up.
Apple, Microsoft, Nvidia and other tech stocks account for 28% of the S&P 500 in market value, more than double the weight of any of the 10 other sectors that make up the index. That doesn’t even include some big tech-focused companies like Amazon and Tesla.
These five companies were the biggest weightings of the S&P 500 in morning trading.
The biggest gain in the S&P 500 came from Corteva, an agricultural company spin-off from DowDuPont. It jumped 6.7% after announcing higher revenues and profits for the last quarter than Wall Street expected.
This has been the norm for this earnings season. Almost 90% of S&P 500 companies told investors how much they earned in the spring, and their profits were about double what they were a year ago.
AP Business Writer Joe McDonald contributed.
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