By Herbert Lash and Huw Jones
NEW YORK/LONDON (Reuters) -Stocks on Wall Street rallied as the dollar and bond yields rose on Friday, after another blowout U.S. jobs report suggested the Federal Reserve may delay cutting interest rates as it awaits further data on whether inflation continues to moderate.
U.S. employers hired far more workers than expected in March and raised wages at a steady clip, the Labor Department said in a labor market report for March that showed the U.S. economy outshining its global peers.
Nonfarm payrolls rose by 303,000 jobs, the unemployment rate fell to 3.8% from 3.9% the prior month and the economy added 22,000 more jobs than previously estimated in January and February. Economists polled by Reuters had forecast 200,000 job gains in March.
“Investors are re-calibrating to this idea that we might not get three rate cuts this year. It might be two, it’s too early to tell,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial (NYSE:AMP) in Troy, Michigan.
“If the economy is running the way it’s running now through most of this year, then it might be likely that the Fed does not cut interest rates this year.”
The likelihood the Fed cuts rates in June, which have helped to propel shares on Wall Street and elsewhere to record highs this year, fell as did the overall size of cuts by year end.
A cooling U.S. services sector and comments this week from Fed Chair Jerome Powell reinforced the view that rate cuts were likely to commence at some point this year.
But some other policymakers have taken a cautious view, with Minneapolis Fed President Neel Kashkari, in particular, striking a more hawkish stance overnight, saying rate cuts might not be required this year if inflation continues to stall.
The year-over-year change in the average hourly earnings cooled and will restore confidence that wage increases are normalizing, said Dec Mullarkey, managing director of investment strategy and asset allocation at SLC Management in Boston.
“Right now, this gives the Fed more reason to stay patient and slightly changes the odds of rate cuts this year from three to two,” he said.
MSCI’s gauge of global stock performance rose 0.26%, weighed down by losses in Europe where the pan-regional STOXX 600 index lost 0.91%. But Wall Street rallied, with the Dow Jones Industrial Average up 0.6%, the S&P 500 0.91% and the Nasdaq Composite 1.15%.
The three major U.S. indexes fell more than 1% each on Thursday on hawkish Fed comments and Middle East tensions.
The yield on 10-year Treasury notes rose 6.7 basis points to 4.376% while the dollar index, a measure of the U.S. currency against six major peers, rose 0.13%.
With the jobs report out of the way, investors will look to next week’s U.S. CPI inflation data for March for further insight to Fed’s monetary easing outlook.
Gold hit a fresh record high at $2,324.59 an ounce, with spot prices last up 1.4% at $2,322.19.
Oil prices extended gains on Friday and were on course for a second weekly gain, supported by geopolitical tensions in the Middle East, concerns over tightening supply and expectations about demand growth as economies improve.
U.S. crude rose 0.59% to $87.10 per barrel and Brent was at $91.28, up 0.69% on the day.
Bitcoin fell 0.87% to $67,939.00.
ASIA EASES
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.45%, tracking Thursday’s late tumble on Wall Street as risk aversion dominated the market mood. The index was set to end the week little changed.
A holiday in China also made for thinner trade.
Tokyo’s Nikkei fell 2%, pressured in part by a stronger yen, thanks to the prospect of further rate hikes there and more jawboning from Japanese officials. (T)
Hong Kong’s Hang Seng Index was little changed.
