TOKYO – Big Tech stocks once again carried Wall Street to a record Friday, even though the majority of stocks fell amid worries about the downside of a hot economy.
Big gains for Meta Platforms and Amazon helped drive the S&P 500 index up by 1.1% to its latest all-time high. It’s in a torrid run where it’s climbed in 13 of the last 14 weeks. The Big Tech stocks, which are two of Wall Street’s most influential, also vaulted the Nasdaq composite up by 1.7%.
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But the Dow Jones Industrial Average, which has less of an emphasis on tech, rose by a more modest 0.3%, or 134 points. And the Russell 2000 index of smaller stocks fell 0.6%.
Stocks felt pressure from much higher yields in the bond market after a report showed U.S. employers hired many more workers last month than economists expected.
While the strength is a boon for workers and keeps the risk of a recession at bay, the worry is that it could preserve some upward pressure on inflation. That in turn could mean a longer wait for the Federal Reserve to begin cutting interest rates.
Hopes for such cuts, which can relax the pressure on the economy and goose investment prices, have been a major reason the U.S. stock market has surged to record heights. Fed Chair Jerome Powell said earlier this week that it’s unlikely cuts will begin as soon as traders had been hoping.
“The Fed threw some cold water on the idea of a March rate cut less than 48 hours ago, and today’s surprisingly strong jobs report won’t dry things off,” said Chris Larkin, managing director, trading and investing, at E-Trade from Morgan Stanley. "It’s definitely not the type of data the Fed had in mind when they said they wanted to see more evidence that inflationary pressures were under control.”
The yield for the 10-year Treasury leaped immediately after the release of the jobs report and climbed to 4.02% from 3.88% late Thursday.
Traders had already pushed out bets for the timing of the first Fed rate cut to May from March following Powell's warning earlier this week. After the jobs report, traders shifted some bets even further out the calendar to June, according to data from CME Group.
Besides the overall hiring number, the jobs report included several signals showing much more strength than expected. Average hourly earnings for workers rose more in January than forecast. The unemployment rate unexpectedly did not get worse. And the government said hiring was actually much stronger in December than it had earlier reported.
The question for the stock market will be whether the upside of such strength outweighs the downside. That is, will a stronger economy create enough extra in corporate profits to make up for delayed or dashed hopes for quick and significant cuts to interest rates?
“The big payroll gains and wage gains aren’t something to be feared,” said Brian Jacobsen, chief economist at Annex Wealth Management. “The Fed has stepped back from its insistence that the labor market needs to weaken before inflation sustainably falls.”
He pointed to a report earlier this week that showed an increase in productivity for U.S. workers, which could help offset the effect of higher wages.
The jobs report landed on Wall Street amid a maelstrom of profit reports that could have helped move the market on their own.
Meta Platforms, the owner of Facebook and Instagram, soared 20.3% after it reported stronger profit for the latest quarter than expected and said it would start paying a dividend to its investors.
Amazon rallied 7.9% after it reported stronger profit and revenue for the latest quarter than expected.
They’re both members of a small group of Big Tech stocks known as the “Magnificent Seven” responsible for the majority of Wall Street’s run to a record. Their huge gains have set expectations very high for their growth, which they need to meet to justify the big runs for their stock prices.
Apple, another member of the Magnificent Seven, slipped 0.5% even though it reported better profit than expected.
Charter Communications slumped 16.5% for the sharpest loss in the S&P 500 after it reported weaker profit for the latest quarter than expected.
Stocks of utilities were also particularly weak, with those in the S&P 500 dropping 1.8%. Besides tending to lag the market when excitement is high about the economy, utility stocks also get hurt by high interest rates. Bonds paying high yields can pull away investors who otherwise might have been interested in utility stocks' relatively high dividends.
All told, the S&P 500 rallied 52.42 points to 4,958.61. The Dow gained 134.58 to 38.654.42, and the Nasdaq jumped 267.31 to 15,628.95.
In markets abroad, stocks tumbled 1.5% in Shanghai to cap their worst week in five years. Worries about a faltering economic recovery and troubles for the real estate industry have made the market one of the world’s worst recently.
The International Monetary Fund forecast the Chinese economy would grow at a 4.6% pace this year and 4% in 2025, dropping from 5.2% last year.
Stocks were mixed elsewhere in Asia and Europe.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.