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US stocks close at new records after ‘Goldilocks’ jobs data

US stocks closed at new all-time highs on Friday after jobs data for June came in better than expected, signalling that the world’s largest economy was emerging from the pandemic at a robust pace.

The US labour market added 850,000 positions last month, beating economists’ expectations for 720,000 new jobs and substantially above the 583,000 revised figure for May.

Wall Street’s broad S&P 500 and technology-heavy Nasdaq Composite built on records hit earlier this week, with both benchmarks closing up 0.8 per cent. The advance marked the seventh straight trading day the S&P 500 has closed at a record, the longest such streak since 1997.

The rise took the weekly gain for the S&P 500 to 1.7 per cent and to just under 2 per cent for the Nasdaq. The latter’s stronger advance reflected the continued shift by investors back into growth and tech stocks, which had lagged earlier this year as portfolio managers bet on shares of companies tethered to the country’s reopening.

The employment reading was not so strong as to suggest the US Federal Reserve would be tempted to rein in its pandemic-era stimulus that has underpinned asset prices throughout the health crisis.

“The US jobs figures couldn’t have delivered better news for Wall Street,” said Danni Hewson, financial analyst at AJ Bell, which said this was a “Goldilocks” moment for financial markets — “not too hot, not too cold”.

“Enough new jobs to confirm the economy is on a roll, [but] enough jobless to give the Fed’s current strategy a warm hug,” she added.

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Accompanying the rise in stocks was a modest rally in government bonds. The yield on the benchmark 10-year US Treasury note slid 0.03 percentage points to 1.42 per cent.

While the 10-year yield is up from the 0.91 per cent at which it started the year, it has fallen from a high of 1.77 per cent hit in March. Investors have ratcheted down their inflation expectations over the past month and a half, which has reverberated throughout markets.

The lower inflation projections have amplified the appeal of growth and tech stocks whose future earnings appear stronger when rates are low.

Tech stocks within the S&P 500 gained more than 3 per cent this week, their best weekly showing since April. Shares of Apple and Microsoft both rose more than 4 per cent over the week, while the chipmaker Advanced Micro Devices was up more than 10 per cent.

“What works within the market is clearly influenced by rates,” said Jonathan Golub, a strategist with Credit Suisse. “And that is influenced by this belief that inflation is not going to be persistently high and to the extent that the Fed is influencing that decision, then they’re having an influence on markets.”

In Europe, the yield on the equivalent German Bund was down 0.03 percentage points at minus 0.24 per cent. The region-wide Stoxx Europe 600 and Frankfurt’s Xetra both closed up 0.3 per cent, while London’s FTSE 100 was flat.

“We think that the European market is really benefiting from euro depreciation,” said Bastien Drut, chief thematic macro strategist at CPR Asset Management, referring to a month-long rally for the dollar against peers. The single currency, which was up slightly at $1.1863 on Friday, is down more than 3 per cent against the greenback since the beginning of June.

While some decision makers at the US central bank are beginning to talk more openly about the need to prepare for the gradual winding down of pandemic-era stimulus, in the eurozone the European Central Bank has maintained a more dovish stance, reflecting the different paces of recovery on each side of the Atlantic.

Oil prices hovered near their highest level for two and half years after officials at the Opec+ meeting of key crude-producing nations struggled to reach an agreement on production output. Brent crude, the global oil benchmark, and the US marker West Texas Intermediate both settled above $75 a barrel.

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