North American stock indexes closed higher on Friday, with the S&P 500 and Nasdaq notching their highest closing levels since early 2022 after a robust U.S. jobs report fueled investor optimism about a soft landing for the economy. Higher oil prices bolstered energy shares on the TSX.
Investors pared bets that the Federal Reserve will cut interest rates in March after a Labor Department report showed nonfarm payrolls increased by 199,000 jobs in November, compared with an estimated increase of 180,000.
The unemployment rate slipped to 3.7%, while average earnings edged up to 0.4% on a monthly basis, compared with forecasts of 0.3% growth.
Interest rate futures show traders widely expect the Federal Reserve to hold interest rates steady at its meeting next week, according to the CME FedWatch tool. However, futures prices now imply traders mostly expect the Fed to start cutting rates in May, two months later than the March meeting many investors had been betting on in recent days.
“The drop in the unemployment rate in particular will assuage any concerns of a recession, and with payrolls and earnings both rising, it keeps the ‘soft landing’ narrative very much in the ascendancy,” said Stuart Cole, head macro economist at Equiti Capital in London.
“The report will likely see some of those forecasting an early Fed cut next year re-evaluating their positions,” Cole said.
That shift in credit market expectations for the first Fed rate cut also influenced what traders are penciling in for the first cut by the Bank of Canada. Implied probabilities in interest rate swaps now suggest a 78% chance the central bank will cut interest rates in April and only a 34% chance in March, according to Refinitiv Eikon data. Earlier this week, stronger odds were placed on March being the first cut.
The S&P 500 climbed 0.41% to end the session at 4,604.37 points.
The Nasdaq gained 0.45% to 14,403.97 points, while Dow Jones Industrial Average rose 0.36% to 36,247.87 points.
The S&P 500′s close was its highest since March 2022, while the Nasdaq’s close was it highest since April 2022.
For the week, the S&P 500 rose 0.2%, while the Nasdaq added 0.7% and the Dow was unchanged.
The S&P 500 remained down 4% from its record high close in late 2021 with the Nasdaq still down 10% from its record high then.
Chipmaker Nvidia and Facebook-owner Meta Platforms each gained nearly 2% in Friday’s session.
Shares of Google-parent Alphabet dipped 1.4%, giving up gains after an AI-led rally in the previous session.
Other data showed U.S. consumer sentiment perked up much more than expected in December, snapping four straight months of declines.
Robust quarterly reports and optimism that the Fed has finished raising rates have fueled steady gains in the U.S. stock market since late October.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 53.03 points, or 0.3%, at 20,331.54. For the week, the index was down 0.6%, giving back some recent gains.
The Toronto market’s energy sector added 1.5% as Saudi Arabia and Russia lobbied OPEC+ members to join output cuts, in a move that helped oil claw back some recent declines. U.S. crude oil futures settled 2.7% higher at US$71.23 a barrel.
Technology also rose, gaining 0.8%, and heavily-weighted financials climbed 0.7% as Canadian Western Bank beat earnings estimates. Its shares ended up 2.9%.
The materials group, which includes precious and base metals miners and fertilizer companies, was a drag. It lost 0.5 as gold prices fell.
On Wall Street, Honeywell dipped 1.6% after the industrial firm said it would buy air conditioner maker Carrier Global’s security business for $4.95 billion. Carrier’s shares rose almost 4%.
Paramount Global soared 12% after reports of takeover interest in the media company. Peer Warner Bros Discovery jumped 6.6%.
DocuSign rallied 4.8% after the e-signature product provider raised its annual forecast for revenue.
Advancing issues outnumbered falling ones within the S&P 500 by a 1.5-to-one ratio.
The S&P 500 posted 33 new highs and no new lows; the Nasdaq recorded 104 new highs and 90 new lows.
Volume on U.S. exchanges was 11.0 billion shares traded, in line with the previous 20 sessions.
Reuters, Globe staff
No custom component found for subtype: oovvuu-video