US stocks staged their first notable rally of 2023 to close the week higher on Friday after December jobs data showed wage growth slowed last month. Investors took the statement as a sign that Federal Reserve officials might ease their rate-hike campaign.
The S&P 500 (^GSPC) rose 2.3%, while the Dow Jones Industrial Average (^DJI) added 700 points, or 2.1%. The tech-heavy Nasdaq Composite (^IXIC) rose 2.6%. All three major averages were on track to end the week in losses before big gains on Friday.
The Labor Department’s final 2022 jobs report showed the US economy added 223,000 payrolls last month, while the unemployment rate fell to 3.5%. Economists had expected readings of 200,000 and 3.7%, respectively.
Employment has moderated in recent months, but hiring remains momentous despite efforts by the Federal Reserve to stifle a tight labor market that has put upward pressure on wages and contributed to stubborn inflation.
“With more than 1.8 job vacancies for every unemployed person, investors should expect higher rates for longer after today’s release,” Lazard chief market strategist Ron Temple said in a note. “As long as the labor market remains this tight, the Fed cannot be sure that inflation will return to its 2% target.”
Meanwhile, the ISM non-manufacturing PMI fell below the 50 threshold for the first time since the start of the pandemic two years ago. The US Services Activity Gauge fell to 49.6 last month from 56.5 in November. Economists polled by Bloomberg had expected a print of 55.0.
Beleaguered Tesla (TSLA) pared a loss of as much as 7% early in the session after the electric carmaker cut prices in China following a drop in deliveries in December. The shares closed up 2.5%.
The Model 3’s starting price has dropped to 229,000 yuan, or about $33,000, while Model Y prices have dropped to 259,900 yuan, or $37,886, according to Tesla’s website.
In other markets, shares of World Wrestling Entertainment (WWE) rose 16.8% after The Wall Street Journal reported that former CEO Vince McMahon will return to explore a sale of the business. McMahon retired in July 2022 following a misconduct investigation.
Bed Bath & Beyond (BBBY) fell another 22.5% on Friday after revealing in a statement the day before that the company was exploring bankruptcy because it ran out of cash. On Thursday, shares plunged 30% after the announcement.
Shares of Costco (COST) rose 7.3%, coming off a six-month low after the bulk retailer released upbeat December sales data. Revenue last month came in at $23.8 billion, up 7% year-over-year, while total comparable store sales grew 5.5%, beating analyst expectations of 5%. Costco was Yahoo Finance’s Company of the Year.
Finally, shares of Biogen (BIIB) closed up 2.8% after the FDA granted accelerated approval to the biotech company and its partner, the Japanese firm Eisai, for their new Alzheimer’s drug. Trading was halted briefly for pending news.
In commodity markets, oil prices rallied on Friday morning after a dismal start to the year in which crude futures fell as much as 10% this week. West Texas Intermediate (WTI) crude oil, the US benchmark index, closed at $73.69.
Outside of the main monthly jobs report, a number of other labor market updates this week suggested that hiring remains strong and job openings are still high. For investors, the numbers suggested that labor conditions remain tight enough for the Federal Reserve to keep raising interest rates, sending stocks lower.
In the previous trading session, all three major averages lost more than 1% after the ADP National Employment Report showed private payrolls rose by 235,000 jobs in December, while jobless claims fell to the lowest level. down since september.
“Last year, it was the Fed versus the markets: They needed valuations down, they wanted stocks down, they wanted bonds down, they wanted home prices down, and they got it,” David Waddell, CEO of namesake firm Waddell and Associates told Yahoo Finance Live on Wednesday. “This year, it’s going to be the Fed against employers, and what the Fed has told employers is, ‘We’re not going to stop until you lay off two million people.'”
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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