On Friday, stocks rose on Wall Street as Treasury yields fell following a surprise report from the government. Employers cut 23,000 jobs last month, which led to notable market movement. Every major index saw gains for the second consecutive week, setting several new records. This positive trend marked a robust start to August after a series of weaker months.

The S&P 500 climbed 47.68 points, reaching 7,757.64, surpassing the record high it set earlier in the week. The Dow Jones Industrial Average increased by 151.83 points, closing at 54,036.93, close to a record set earlier. The Nasdaq composite jumped 342.26 points to 26,690.62, an increase of 1.3%.

Large-cap technology stocks have been pivotal to these gains, often influencing the broader market direction. For instance, Nvidia shares rose 2.3%, while Broadcom advanced 1.7%. The bond market’s reaction to the job cut report suggested potential delays in Federal Reserve interest rate increases aimed at curbing inflation. The yield on the 10-year Treasury decreased from 4.67% to 4.64%, briefly dropping to 4.60% before a slight recovery.

“Although the stock market is likely to welcome the dovish implications of the report, investors should be wary of the future growth potential of an economy where fewer people are working,” said Peter Graf, Chief Investment Officer at Amova Asset Management Americas.

The job market report also revised previous figures for June and May, cutting a combined total of 103,000 jobs. This paints a less optimistic picture of the job market, previously a strong component amid inflation and consumer spending concerns.

Focus on the Federal Reserve’s Next Moves

The Federal Reserve has maintained interest rates due to concerns about inflation, exacerbated by rising oil prices linked to the U.S.-Iran conflict. Wall Street anticipates at least one interest rate hike by year-end, with forecasts in flux for the next meeting. Expectations for a rate cut in September have decreased to 42%, down from 55% the day before and 67% the previous week, as per CME FedWatch.

A lagging job market complicates the Fed’s task of balancing job growth with inflation control. Raising interest rates might cool inflation but could further destabilize an already fragile job market, as businesses might struggle to expand due to higher borrowing costs. Businesses and Wall Street favor lower interest rates, which can spur investments and potentially strengthen a weakened job market, though they could also intensify inflation issues.

Next week, Wall Street will monitor significant inflation updates. The consumer price index (CPI) will be under scrutiny, with expectations of a 3.4% inflation rate rise in July, a slight dip from June’s 3.5%. Inflation has stubbornly exceeded 3% for much of the year.

“Today’s weak payrolls print may ease the pressure on the Fed to raise rates at its September meeting, but next week’s inflation data will still likely be the deciding factor,” said Ellen Zentner, Chief Economic Strategist for Morgan Stanley Wealth Management.

Corporate Earnings and Oil Prices

The weak job report capped a week largely focused on corporate earnings and the ongoing U.S.-Iran conflict. Corporate earnings for Q2 showed impressive growth, the strongest since 2021. Nearly 90% of S&P 500 companies reported results, with analysts predicting a 50% overall profit growth. This has somewhat alleviated previous concerns about the legitimacy of significant stock gains expected in 2026. Solid profits help solidify such stock value increases.

With earnings reports winding down, Airbnb saw a dramatic 17.4% surge after posting unexpectedly strong profit and revenue figures. Meanwhile, oil prices rose, with Brent crude climbing 1.3% to $83.55 per barrel. Escalating oil prices have fueled inflation concerns. During the five-month U.S.-Iran conflict, prices peaked at $113 per barrel, affecting gasoline and shipping costs for diverse products. The U.S. and Iran have expressed intentions to negotiate deals that may reopen the Strait of Hormuz, a crucial passage for global oil and natural gas transit.