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U.S. stocks rose in midday trading Friday after the May nonfarm-payrolls report showed a less-than-expected gain, leading investors to bet that the Federal Reserve will maintain its easy-money policies for longer.

How is the stock market performing?
  • The Dow Jones Industrial Average DJIA, +0.40% was up 117.67 points, or 0.3%, at 34,694.71.
  • The S&P 500 index SPX, +0.78% advanced 29.68 points to 4,222.53, a gain of 0.7%, led by gains in the technology XLK, +1.78% and consumer-discretionary XLY, +0.71% sectors.
  • The Nasdaq Composite Index COMP, +1.44% rose 185.65 points, or 1.4%, to 13,800.15.

On Thursday, the Dow closed down 23.34 points, or 0.1%, at 34,577.04, snapping a five-day win streak. The S&P 500 stumbled 15.27 points, or 0.4%, to 4,192.85, while the Nasdaq Composite declined 141.82 points, or 1%, to 13,614.51.

For the week, the Dow was headed for a weekly rise of 0.5%, the S&P 500 was on track for a gain of 0.3%, while the Nasdaq was set for ra decline of 0.3%, FactSet data show.

What’s driving the market?

May’s employment report from the U.S. Labor Department showed that the U.S. created 559,000 jobs, falling short of The Wall Street consensus estimate for a gain of 671,000, based on a poll of economists by Dow Jones and The Wall Street Journal.

Investors breathed “a sigh of relief” after the jobs report today because it was neither so wildly disappointing as the reading for April nor so hot as to make them fear the Federal Reserve will now move more quickly in raising interest rates, according to Bob Doll, the new chief investment officer of Crossmark Global Investments.

“It was a little on the weak side versus consensus, but not horribly so,” Doll, who joined the faith-based investment firm from asset manager Nuveen, said Friday in a phone interview. “The market was fearful after last month’s disappointment.” 

The unemployment rate fell to 5.8% from 6.1%, compared with estimates of a dip to 5.9%. The official rate probably understates the true level of joblessness by 2 to 3 percentage points, economists say, but it is falling steadily.

The May report, however, will likely be interpreted as bullish for the market overall, if it leads the Fed to delay removing its pandemic-era monetary support, including the $120 billion a month asset-purchase plan.

“It’s pretty much a goldilocks scenario, not too soft to have sparked fears of a weak economic recovery, and not too strong to have caused concern about accelerated Fed action,” wrote Mike Loewengart, managing director, investment strategy at E-Trade Financial, in emailed comments.

But in Doll’s view, the market still faces the threat of inflationary pressures.

“I don’t think it’s all transitory, as the Fed suggests,” Doll said. “All you have to do is live life and see all the ‘help wanted’ signs everywhere,” with companies having to entice workers with higher wages to fill jobs, he said. “The zero-to-2% inflation world that we’ve been in for a long time is probably over.”

The May employment report showed that many companies have increased wages to lure workers. Average hourly pay rose 15 cents, or 0.5%, to $30.33 an hour last month. The labor-force participation rate, another closely watched metric, edged lower to 61.6%.

Charlie Ripley, senior investment strategist for Allianz Investment Management, also pointed to wage inflation creeping into the job market, saying that with the labor-force participation rate ticking lower “it appears like employers may need to offer up more incentives to entice workers to fill the record number of job openings that are out there.”

The government data come after April data showed that just 266,000 new jobs were created on a seasonally adjusted basis, significantly missing economists’ forecast that had come in on average at around 1 million.

The nonfarm-payrolls data also follow a reading of private-sector employment from Automatic Data Processing on Thursday, which reported a 978,000 increase in jobs created in May. However, the ADP reports haven’t always aligned with the more closely watched government report.

Check out: Why markets have been stuck, and what might get them moving again

On Friday, President Joe Biden, during a news conference to discuss the employment figures, touted the “historic progress” that has been made since he has taken office in January, pointing to roughly 2 million jobs recovered.

See: A lot is riding on May jobs report after recent U.S. hiring lull

Cleveland Fed President Loretta Mester during an interview on CNBC said that the Fed wants to be ‘very deliberately patient’ on policy decisions. She also said that wage gains aren’t yet feeding into underlying inflation.

Separately, a report on Friday showed that U.S. factory orders slipped in April 0.6%,  the Commerce Department said Friday. Economists surveyed by the Wall Street Journal expected a 0.2% decline, and the drop snapped an eleven-month string of consecutive increases going back to May of last year.

Investors were also keeping one eye on discussions around an infrastructure spending proposal, after President Biden signaled that his administration would be willing to make concessions on corporate taxes to forge a deal.

Which companies are in focus?
  • Bill Ackman’s special-purpose acquisition company, Pershing Square Tontine HoldingsPSTH is nearing a transaction with Universal Music Group that would value the world’s largest music business at about $40 billion. Pershing Square Tontine’s shares were down about 11.5% in midday trading
  • Meme stock AMC Entertainment Holdings IncAMC revealed Thursday afternoon that it will ask shareholders for the authority to issue up to 25 million shares, after selling stock into a dramatic upswell of its share price in recent days. Shares of AMC were up 3.1%.
  • Shares of Apple IncAAPL rose 1.8% ahead of the technology giant’s Worldwide Developers Conference (WWDC) next week.
  • Shares of ODP CorpODP, rallied 8.1%, after the office supplies retailer received an unsolicited $1.0 billion bid from Staples parent USR Parent Inc. to buy ODP’s consumer business, which includes the Office Depot and OfficeMax retail stores business.
  • Shares of Regeneron Pharmaceuticals Inc. REGN were up 1.3% after the company said U.S. regulators had authorized a lower-dose and subcutaneous version of its COVID-19 antibody treatment.
  • The COVID-19 vaccine developed jointly by Pfizer PFE and BioNTech BNTX has been approved for 12 to 15-year-olds in the U.K, the Medicines and Healthcare products Regulatory Agency (MHRA) said on Friday. Shares of Pfizer were up 0.8% around midday trading while BioNTech shares jumped 6.1%.
How are other assets faring?
  • The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, was at 1.555%, compared with 1.628% on Thursday.
  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was down 0.4%.
  • Oil futures were trading higher, with the U.S. benchmark CL00 up 0.9% to trade at $69.41 a barrel; while gold futures GC00 added 1.1% to around $1,893.20 an ounce on Comex.
  • In European equities trading, the pan-Continental Stoxx Europe 600 SXXP, +0.20% rose 0.4% Friday for a record close bringing gains for the week to 0.8%. London’s FTSE 100 UKX edged up 0.1% for a 0.7% weekly gain.
  • In Asia, the Shanghai Composite SHCOMP added 0.2%, while the Hang Seng Index HSI slipped by 0.2%; Japan’s Nikkei 225 NIK lost 0.4%.