S&P 500 Records Remarkable Weekly Advance Ahead of Labor Day Weekend! ??

S&P 500 and Nasdaq Achieve Back-to-Back Weekly Gains

U.S. stock markets closed the week with mostly positive outcomes, as the Dow Jones Industrial Average and S&P 500 experienced slight increases. These gains were driven by a rise in Treasury yields following the release of a new report on August’s job market performance. With Labor Day approaching, U.S. markets will be closed on Monday.

Here’s a breakdown of how the stock indexes performed:

• The Dow Jones Industrial Average (DJIA) climbed by 115.80 points or 0.3%, settling at 34,837.71.
• The S&P 500 (SPX) posted a gain of 8.11 points or 0.2%, concluding at 4,515.77.
• The Nasdaq Composite (COMP) showed a marginal decline of 3.15 points, or less than 0.1%, closing at 14,031.81.

For the week, the Dow rose by 1.4%, the S&P 500 advanced by 2.5%, and the Nasdaq achieved a 3.2% gain, according to data from Dow Jones Market Data. The S&P 500 recorded its most significant weekly gain since the week ending June 16.

Market Influencers: U.S. stocks wrapped up the week on a positive note, with investors focusing on the latest nonfarm payrolls report ahead of the long Labor Day weekend.

The Labor Department’s report indicated that the U.S. economy added 187,000 jobs in August, surpassing economists’ expectations of a 170,000 gain. However, it also confirmed a slowdown in the rate of job growth, a trend that is likely to be welcomed by the Federal Reserve. The unemployment rate increased from 3.5% in July to 3.8%.

The nonfarm payrolls report signals that economic growth remains “solid,” giving some investors hope for a “soft landing.” Nevertheless, experts caution against prematurely declaring the Fed’s mission accomplished in taming inflation through interest rate hikes designed to cool the economy.

The report also revealed a 0.2% increase in average hourly earnings for the past year, resulting in a 4.3% wage growth rate. Despite the deceleration in wage growth, this, coupled with persistent inflation, maintains the possibility of another rate hike by the Fed in November.

Technology and growth stocks felt the heat from rising Treasury yields during the trading session. The yield on the 10-year Treasury note surged to 4.173%, while two-year yields inched up to 4.866%, as per Dow Jones Market Data.

Following a strong week for technology stocks, some investors appeared to engage in profit-taking, with a noticeable shift toward cyclical sectors and small-cap equities. FactSet data revealed that the S&P 500’s tech sector ended the week with a 4.4% gain.

The stock market initially saw gains trimmed on Friday after remarks by Cleveland Fed President Loretta Mester, which prompted Treasury yields to mostly rise.

Mester voiced concerns about persistently high inflation, stating that “although there has been some progress, inflation remains too high.” Fed officials continue to assess whether the current level of the Fed’s benchmark rate is sufficiently restrictive and how long a restrictive policy must be maintained to control inflation.

Federal-funds futures remained indicative of a high probability that the Fed would keep its benchmark rate within the targeted range of 5.25% to 5.5% at the upcoming policy meeting later this month, according to the CME FedWatch Tool.

Craig Erlam, senior market analyst at Oanda, noted, “To be clear, the Fed won’t get carried away with today’s report. It’s just one that needs to be repeated on a number of occasions, but there’s plenty of cause for optimism in there.”

Additional economic data released on Friday included a closely monitored index measuring U.S. manufacturing activity, which rose by 1.2 points to 47.6% in August, surpassing expectations. A reading below 50% indicates a contraction in activity.

The effects of the Fed’s monetary tightening policies are still rippling through the economy, which has shown remarkable resilience despite the central bank’s aggressive rate hikes since early 2022. Steve Wyett, chief investment strategist at BOK Financial, expressed caution regarding how much further the stock market could ascend, stating that “the majority of the impact of what the Fed has done is still in front of us.”

Year-to-date, the S&P 500 has surged by 17.6%, according to FactSet data.

Wyett added, “It just appears the stock market has built in a lot of really good news. If the Fed is able to thread the needle on this, we’re not so sure that results in a significant move higher in equities.”

Given the impending Labor Day weekend, trading volume in the stock market was anticipated to be light on Friday.

Noteworthy Developments in Companies:

• Walgreens Boots Alliance Inc. (WBA) shares plummeted by 7.4% after reaching a 14-year closing low the previous day. The drugstore chain and healthcare services company announced the departure of Chief Executive Rosalind Brewer after her 2.5-year tenure.
• Dell Technologies Inc. (DELL) stock surged by more than 21% following the technology giant’s impressive earnings and revenue performance.
• Broadcom Inc. (AVGO) shares dropped by 5.5% after the chip and software company’s revenue forecast for the current quarter failed to surpass consensus expectations.
• Lululemon Athletica (LULU) reported same-store sales that fell short of expectations, but the yoga-themed apparel maker raised its full-year forecast, resulting in a 6% increase in its share price.
• Tesla Inc. (TSLA) stock slumped by 5.1% after the electric vehicle maker announced price reductions for its Model S and Model X cars in China, just two weeks after lowering prices on those premium vehicles.