Investing.com — Wall Street ended at a record high on Friday, as the first monthly loss in U.S. jobs since February prompted traders to pare bets for Federal Reserve interest rate hikes. Equities also notched their best week since mid-April, helped by a slide in oil prices, a strong earnings season, and a rebound in chip stocks.
The benchmark S&P 500 index advanced 0.6% to close at 7,753.92 points, a record. The tech-heavy climbed 1.3% to settle at 26,690.62 points, within striking distance of its last record finish posted at the start of June. The blue-chip added 0.3% to conclude at 54,036.52 points.
For the week, the Nasdaq led gains with a 5.2% rise, followed by the S&P at 3.5% and the Dow at 3%. It was the best week for all three averages since April 17.
“The jobs report took down Fed rate hike expectations and cooled bond yields which is an impetus for stocks to get a lift,” Mark Luschini, chief investment strategist at Janney Montgomery Scott, told Investing.com.
“Tech has resumed its leadership which is helping to generate a pretty handsome return for the S&P 500 this week, and along with it pop the stock market to a record high. Relief on the Iranian war front has tempered oil prices which is also a potential boost for consumer spending and may relieve some of the anxiety around the second order effects of high energy costs bleeding into inflation,” he said.
“The low hire, low fire environment remains but for now it is sufficient to propel spending, while at the same time not with so much demand thrust that inflation fails to abate over the coming months. If inflation readings over the next couple of months affirm that condition, the corporate profit picture should guide equity markets to new highs,” Luschini added. Get fresh Wall Street insights with InvestingPro – now 55% off!
Odds of policy tightening decline after jobs report
According to the U.S. Bureau of Labor Statistics, nonfarm payrolls fell by 23k in July, compared to a consensus estimate for a rise of 85k. This marked the first monthly loss in jobs since February. Meanwhile, employment in May and June were revised lower by a combined 103k. The unemployment rate ticked down to 4.1% in July from 4.2% in June.
The decrease in payrolls was largely due to a nearly 50k monthly fall in local government education jobs.
“The miss in July was because of a 53k decline in government employment, which the survey’s detail attributes to local government education jobs (i.e. K-12). This looks like a wonky seasonal adjustment fluke,” Bill Adams, chief U.S. economist at Fifth Third Commercial Bank, said.
“The Bureau of Labor Statistics tries to adjust their measurement of K-12 jobs for the big swings that come every year in the summer months, but it’s hard to do in practice. Private employment rose 30,000 in July, which was slow but not a crisis,” he noted.
“Incorporating these data, job growth averaged a slow 20k per month in the last three months and a slightly better 61k per month since the turn of the year. While these data are disappointing they are still better than the economy’s 10,000 job per month average in 2025,” Adams added.
The data comes at a complicated time for the Federal Reserve. On the one hand, despite the negative report, the overall labor market remains solid. On the other hand, inflationary risks are much higher amid ongoing volatility in oil prices due to the Middle East conflict, with some policymakers showing a clear bias towards raising rates at the Fed’s last monetary policy meeting in July.
The divergence in the Fed’s dual mandate presents a dilemma for the central bank. Elevated inflationary dynamics call for rate hikes, but resilience in the labor market suggests little room for rate cuts. While higher borrowing costs can help combat inflation, they come at the risk of denting the labor market and the wider economy.
“Friday’s jobs report was not just much weaker-than-expected, it showed that the economy shed jobs during July, which puts the Federal Reserve in a conundrum, since inflation is still elevated and sticky. While one weak jobs report is not likely to dictate Federal Reserve policy, we think the central bank will maintain its wait and see approach on interest rates, and allow more time to pass to examine incoming economic data,” Brent Wilsey, chief investment officer at Wilsey Asset Management, said.
“The weaker-than-expected jobs report likely doesn’t change much for the Federal Reserve, as Chair Warsh is allowing the data to guide policy and the data as of now likely warrants keeping rates at current levels,” he said.
“Friday’s negative jobs number raises the importance of next Wednesday’s CPI for July, which may see an uptick, since oil prices spiked during the second half of July, given the re-escalation of tensions in Iran. This may very well be one of the more noisy CPI reports in recent memory,” Wilsey added.
As per the CME FedWatch tool, the odds of a quarter-point rate hike by the Fed in September slipped to nearly 42% after the release of the July jobs report, from 55% the previous day.
Chip stocks bounce back after worst month since financial crisis
Away from the economic calendar, the – a key barometer of chip stocks – logged a weekly advance of 9.3%, underscoring a stellar start to August following a more than 20% slide in July.
Chip stocks had been the primary driver of the high-flying artificial intelligence trade that powered Wall Street to a record high earlier in the year despite the Middle East conflict. Over the last two months, however, the AI trade slumped amid investors stepping back and taking a look at a rally that had flown too high and too fast. Concerns abounded about lofty valuations, uncertain timelines on returns from massive spending on AI, and Chinese competition.
But blowout quarterly results from at the end of July, along with the tech titan becoming the first AI major to not raise spending plans, marked the end of the slide. Strong numbers from further lifted spirits. Traders also identified the saga of Leopold Aschenbrenner’s hedge fund, Situational Awareness, as both a catalyst for the recent weakness in the AI trade and its rebound.
The rebound in the AI trade helped Wall Street reclaim a record high on Tuesday for the first time since early June. The S&P did slip over Wednesday and Thursday, in part due to underwhelming responses to quarterly results from , , , and .
On Friday, and were notable earnings movers.
Airbnb surged 17.4% after the short-stay rental firm delivered better-than-anticipated quarterly results and hiked its annual outlook. Cloudflare added 5.6% after announcing income and revenue that exceeded Wall Street projections, as it benefited from increasing demand for the infrastructure used to scale AI programs.
Hormuz deal awaited
Turning to the Middle East, Axios reported that Iran was awaiting final approvals from its Supreme National Security Council on a deal with Oman and the U.S. to reopen the critical Strait of Hormuz, citing a diplomat from one of the mediating countries. Reuters later reported there had been progress on the deal, citing a U.S. official.
Iran’s Fars News on Thursday had reported that the initial text of the plan was under review by authorities, citing parliament member Alireza Salimi. According to the framework, passage of U.S., Israeli, and other hostile vessels through the vital waterway would be prohibited until compensation was paid, Fars said.
The news agency separately reported that according to the plan, entry into the strait would be through the northern corridor near the Iranian coast and exit would be through the southern corridor near the Oman coast, citing an informed source in the foreign ministry. After a specified deadline, transit through both corridors would be stopped and would instead take place through a middle corridor, with Iran managing the entry and jointly managing the exit with Oman.
If true, these aspects of the plan would most likely be unacceptable to Washington.
Oil prices on Friday turned lower after the Reuters story in choppy trade, and were set for weekly declines of about 8%. , the global benchmark, were last down 0.4% to $82.16 a barrel.
Ambar Warrick and Scott Kanowsky contributed to this article