The April jobs report was weak, but stock traders are cheering because the slowing labor market could mean a rate cut sooner than later.
US stocks soared on Friday after a light April jobs report sent bond yields tumbling and increased the chances of an interest rate cut from the Federal Reserve later this year.
The US economy added 175,000 jobs in April, well below economist forecasts of 238,000 jobs and far short of 303,000 added in March. Meanwhile, the unemployment rate ticked higher to 3.9% from 3.8%.
The light jobs report should give the Fed more flexibility in speeding up the timing of rate cuts, and bond yields fell significantly with that sentiment in mind. The 10-year Treasury dropped 10 basis points to 4.48%.
Investors have been closely watching economic data — and the Fed’s reaction to it — for signs of when the central bank will lower interest rates. In recent weeks, expectations for cuts have been pushed out as new data has come in hot. The market is currently in a situation where negative economic news is positive for risk assets like stocks.
