Investing.com -- U.S. stocks climbed sharply on Friday after a stronger-than-expected April jobs report helped ease concerns about a potential recession, propelling the S&P 500 to its longest winning streak in more than 20 years.
The S&P 500 rose 1.47% to close at 5,686.67, marking its ninth straight day of gains—the longest such streak since November 2004. The Dow Jones Industrial Average gained 564.47 points, or 1.39%, finishing at 41,317.43. The Nasdaq Composite advanced 1.51% to 17,977.73. With Friday’s rally, both the S&P 500 and the Nasdaq have fully recouped their losses triggered by President Donald Trump’s announcement of "reciprocal" tariffs on April 2.
April nonfarm payrolls increased by 177,000, comfortably ahead of the 133,000 forecast by economists surveyed by Dow Jones. Although the pace of hiring slowed from March’s upwardly revised 228,000 figure, the data helped reassure markets after a turbulent month. The unemployment rate remained steady at 4.2%, matching expectations.
All three major indexes notched a second consecutive weekly gain. The S&P 500 rose 2.9% for the week and is now more than 7% off its February peak, after previously falling nearly 20%. The Dow ended the week up 3%, while the Nasdaq posted a 3.4% gain.
The latest equities rebound may be tested this week as investors await the Federal Reserve’s policy meeting, looking for signs that the central bank is moving closer to resuming interest rate cuts.
Although policymakers are expected to leave rates unchanged in Wednesday’s statement, market participants are still betting on a potential reduction as early as June. However, the likelihood of near-term easing has decreased following Friday’s strong U.S. employment data.
"The May FOMC meeting looks like a placeholder, more so after the strong jobs report. The Fed will likely remain on hold, and we expect no change in Chair Powell’s tone from his recent speeches," Bank of America (NYSE:BAC) strategists said in a note.
"He will probably reiterate that the Fed is assessing the total impact of all policy changes by the Trump Administration, not just trade policy in isolation. We think the bar for a June cut is high, but Powell is unlikely to rule it out at this stage," they added.
Ahead of the Fed’s decision, investors will also be parsing fresh services PMI data, which could offer further insight into second-quarter growth trends for the U.S. economy.
Investors brace for another wave of earnings reports
Corporate earnings over the past few weeks have largely come in ahead of expectations. With roughly two-thirds of S&P 500 companies having reported, overall earnings are beating forecasts by about 7%, compared to a historical average of 4.3%, according to LSEG IBES.
Tech giants Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META) helped lift equity indexes last Thursday after delivering strong quarterly results.
This week, attention turns to another wave of high-profile reports, with updates expected from AMD (NASDAQ:AMD), Uber Technologies (NYSE:UBER), Walt Disney (NYSE:DIS), Super Micro Computer (NASDAQ:SMCI), and ARM Holdings (LON:ARM), among others.
What analysts are saying about U.S. stocks
RBC Capital Markets: "We are still seeing companies that beat consensus EPS forecasts outperform the broader market in terms of immediate stock price reaction within both the R1000 and the R2000. The margin of outperformance also remains wider than usual, suggesting to us earnings dynamics, not just the apparent pivot on trade policy, have been pushing the U.S. equity market higher. That being said, this phenomenon does appear to be losing some intensity since mid-April, suggesting to us that the U.S. equity market may soon demand another catalyst to keep the recovery going."
Morgan Stanley (NYSE:MS): While there is a good amount of focus on the structural basis for a rotation away from the U.S., our focus is more on the cyclical elements of the U.S. versus international equities trade. This is the type of backdrop where higher quality areas of the market and indices (the S&P 500) tend to outperform on a relative basis. In particular, it’s a time when quality growth attributes tend to be rewarded as the cyclical impulse slows. U.S. large-cap indices stand out positively in this regard with more significant quality growth weights and lower volatility of earnings growth. A weaker dollar should also benefit U.S. relative earnings revisions breadth, which is now starting to inflect higher from low levels versus MSCI ACWI Ex-US—another tailwind for relative performance."
Yardeni Research: Now that we are lowering the odds of a recession back to 35%, should we be raising our S&P 500 target back to 6400? We are inclined to do so given the power of the V-shaped rally in the S&P 500. However, we aren’t ready to do so given the following two issues," the firm said, citing concerns over the deteriorating corporate earnings outlook and limited valuations upside.