US stocks felt both the upside and downside of a surprisingly strong report that said the nation's unemployment rate improved last month.
After initially rising toward an all-time high, the S&P 500 flipped between gains and losses before finishing with a minuscule dip of less than 0.1%. The Dow Jones Industrial Average dropped 66 points, or 0.1%, and the Nasdaq composite fell 0.2%. Both also erased early gains.
Treasury yields, meanwhile, remained higher in the bond market after the Labor Department said US employers added 130,000 jobs to their payrolls last month, more than economists expected. That helped calm worries from a day earlier, when a discouraging report suggested spending by US households, the main engine of the economy, may be stalling.
Jobs data gives new read on US economy
On one hand, the strong data on jobs raises hopes that the US economy can remain solid and keep driving big profits for companies. Stocks in the energy and raw-material industries jumped to some of the bigger gains in the S&P 500, for example, and their profits tend to be closely tied to the health of the economy.
But on the other hand for the broad stock market, the stronger-than-expected jobs data could also keep the Federal Reserve on hold when it comes to cuts to interest rates. And higher rates can drag on prices for stocks and all kinds of other investments.
After Wednesday's report showed the tick down for the US unemployment rate, traders pushed back their bets for when the Fed could begin cutting interest rates again, according to data from CME Group. The bets slid further into the summer, after a new Fed chair is set to take the helm.
If Wednesday's jobs report had shown a rise in the unemployment rate or other worsening for the job market, that could have pushed the Fed to resume its cuts more quickly.
Lower rates would give the economy and financial markets a boost, though at the cost of potentially worsening inflation. The next monthly update on inflation at the US consumer level is arriving on Friday, and it will likely be another big influence on the Fed's plans.
US Treasury bond yields lift
After the jobs report, the yield on the 10-year Treasury edged up to 4.17% from 4.16% late Tuesday. The two-year Treasury yield, which moves more closely with expectations for Fed moves, climbed more. It rose to 3.51% from 3.45%.
To be sure, all is still not perfectly clear for the US economy. Wednesday's report included major revisions, which said employers added just 181,000 jobs for all of last year. That's less than a third of the previously reported 584,000, and it's the weakest showing for a year since 2020, when COVID-19 shut down the economy.
The overall jobs report nevertheless looked to be an encouraging signal for the economy.
All told, the S&P 500 edged down by 0.34 to 6,941.47 points. The Dow Jones Industrial Average dipped 66.74 to 50,121.40, and the Nasdaq composite fell 36.01 to 23,066.47.
