Why Wall Street is so happy to see the job market slowing down

MAY 3, 2024

US stocks soared on Friday after a light April jobs report sent bond yields tumbling and increased the chances of an interest rate cut from the Federal Reserve later this year.

The US economy added 175,000 jobs in April, well below economist forecasts of 238,000 jobs and far short of 303,000 added in March. Meanwhile, the unemployment rate ticked higher to 3.9% from 3.8%.

The light jobs report should give the Fed more flexibility in speeding up the timing of rate cuts, and bond yields fell significantly with that sentiment in mind. The 10-year Treasury dropped 10 basis points to 4.48%.

Investors have been closely watching economic data — and the Fed’s reaction to it — for signs of when the central bank will lower interest rates. In recent weeks, expectations for cuts have been pushed out as new data has come in hot. The market is currently in a situation where negative economic news is positive for risk assets like stocks.

“The April jobs report was just what the market ordered,” Russell Price, chief economist at Ameriprise, wrote in a client note. “Job growth was solid and well distributed, but the pace eased considerably relative to the first quarter’s surprisingly strong gains.”

Today’s jobs report was the “first material ‘downside surprise’ in over two years,” added Key Wealth CIO George Mateyo in comments to Business Insider. “Yet, the weakness was not so weak to suggest that the labor market is rolling over. It was a slowdown that the Fed and many market participants have been wanting for some time.”

Also helping boost stocks on Friday is Apple, which surged about 7% after it reported a better-than-feared fiscal second-quarter earnings report. The iPhone maker also launched a historic $110 billion stock buyback program and increased its quarterly dividend by 4%, which was cheered by investors.

Here’s where US indexes stood at 10:30 a.m. on Friday: