On Friday, the stock market exhibited a lack of clear direction, continuing the sluggish performance observed in the previous session. The major indices oscillated around the breakeven point throughout the day, ultimately closing slightly lower.
**Market Performance**
After reaching a new intraday high in early afternoon trading, the S&P 500 finished down 5.97 points, or 0.1%, at 5,346.99. The Dow Jones Industrial Average fell 87.18 points, or 0.2%, to 38,798.99, while the Nasdaq Composite dropped 39.99 points, or 0.2%, to 17,133.13.
For the week, the Nasdaq surged by 2.4%, the S&P 500 increased by 1.3%, and the narrower Dow rose by 0.3%.
**Factors Influencing Market Behavior**
The erratic trading on Wall Street was influenced by the Labor Department's closely monitored monthly jobs report. The report revealed that employment rose far more than expected in May, but also showed an unexpected increase in the unemployment rate.
In May, non-farm payroll employment surged by 272,000 jobs following a revised increase of 165,000 jobs in April. Economists had anticipated a growth of about 185,000 jobs. Additionally, average hourly earnings grew at an annual rate of 4.1% in May, up from 4.0% in April.
However, the unemployment rate inched up to 4.0% in May from 3.9% in April, contrary to expectations that it would remain unchanged. This marked the highest unemployment rate since January 2022.
**Expert Opinions**
Bill Adams, Chief Economist at Comerica Bank, described the May jobs report as a "Rorschach blot," indicating it can be interpreted in multiple ways. Optimists see the solid payroll growth as a sign of continued economic expansion, while pessimists focus on the rise in the unemployment rate, increased part-time employment, and a dip in temporary employment—factors that might signal broader labor market weakness.
Adams also highlighted divergent views on the interest rate outlook. He noted that accelerating wage growth could signal inflationary pressures if the Federal Reserve eases its policies. Conversely, higher unemployment might indicate weaker future wage growth, reduced consumer demand, and less pricing power for businesses, potentially cooling inflation.
**Sector Analysis**
While most major sectors showed modest changes, gold stocks experienced significant weakness, leading to a 6.6% drop in the NYSE Arca Gold Bugs Index. This decline mirrored a steep fall in gold prices.
Steel stocks also moved notably lower, dragging the NYSE Arca Steel Index down by 1.9% to a six-month closing low. Additionally, interest rate-sensitive telecom stocks saw considerable weakness, with the NYSE Arca North American Telecom Index losing 1.8%.
Notable declines were also seen in networking, housing, and airline stocks, while pharmaceutical and banking stocks displayed modest strength.
**Global Markets**
In overseas trading, stock markets in the Asia-Pacific region had mixed results on Friday. Japan's Nikkei 225 Index fell by 0.1% and Hong Kong's Hang Seng Index dropped by 0.6%, while China’s Shanghai Composite Index rose by 0.1% and South Korea's Kospi surged by 1.2%.
In Europe, the major markets moved downward. Germany's DAX Index, France's CAC 40 Index, and the U.K.'s FTSE 100 Index each fell by 0.5%.
In the bond market, treasuries declined sharply in response to the stronger-than-expected jobs data. Subsequently, the yield on the benchmark ten-year note increased by 14.3 basis points to 4.424%.
**Looking Ahead**
Next week, the Federal Reserve will announce its latest monetary policy decision. While the central bank is widely expected to keep interest rates unchanged, a report on consumer price inflation will likely garner more attention. Additionally, reports on producer prices, import and export prices, consumer sentiment, and inflation expectations may also attract interest.
