U.S. stocks moved higher on Thursday after the June employment report showed weaker-than-expected job creation.
The softer data reduced concerns that the Federal Reserve may need to raise interest rates in the near term. However, continued weakness in semiconductor shares limited gains across the technology sector.
S&P 500, Nasdaq and Dow Advance
At 10:09 ET, or 14:09 GMT, the S&P 500 was up 0.6% at 7,530.36 points.
The technology-heavy Nasdaq Composite also gained 0.6% to reach 26,196.24 points.
Meanwhile, the Dow Jones Industrial Average climbed 0.7% to 52,660.24 points.
U.S. Payroll Growth Misses Forecasts
According to the Bureau of Labor Statistics, the U.S. economy added 57,000 nonfarm payrolls in June.
The figure was well below economists’ forecast of 114,000 jobs. It also represented a sharp slowdown from May’s downwardly revised increase of 129,000.
Employment increased in professional and business services, social assistance and healthcare.
However, the leisure and hospitality sector recorded a decline in jobs.
Three-Month Hiring Average Shows Resilience
Including the latest figures, the three-month average for payroll growth fell to approximately 111,000 jobs.
Although hiring has slowed, the average suggests that the U.S. labor market remains relatively stable.
Joseph Brusuelas, chief economist at RSM US, said initial employment estimates have recently been affected by significant monthly revisions.
He argued that the three-month average provides a more reliable picture of the underlying hiring trend. Brusuelas also expects the June payroll figure to be revised higher when the July report is released.
Fed Rate-Hike Expectations Ease
A resilient labor market had previously encouraged investors to expect further interest-rate increases from the Federal Reserve.
Policymakers remain concerned that energy-related pressures could keep inflation elevated.
However, those expectations weakened after both nonfarm payrolls and private-sector employment came in below forecasts.
Higher interest rates can help control inflation, but they can also weaken economic growth and reduce demand for workers.
Unemployment Rate Falls to 4.2%
The Bureau of Labor Statistics also reported that the U.S. unemployment rate declined to 4.2% in June.
The rate had remained at 4.3% during the previous three months.
Harvard economics professor Jason Furman highlighted the unusual stability of the unemployment rate. He noted that it had risen from around 3.5% without continuing into a more severe increase.
Furman said the latest report made the immediate outlook appear slightly weaker. Nevertheless, he described the labor market as remarkably resilient in the face of major economic shocks.
Kevin Warsh Comments Support Market Sentiment
Market sentiment also received support from comments by Federal Reserve Chair Kevin Warsh.
Warsh said inflation risks had declined, although he avoided offering direct guidance about future interest-rate decisions.
He also repeated the central bank’s commitment to price stability.
Following the remarks, traders largely removed expectations that the Federal Reserve would raise rates in July.
Deutsche Bank analysts said weaker private payroll figures and softer factory activity had added momentum to the shift toward less hawkish rate expectations.
Semiconductor Stocks Extend Their Decline
Despite the gains in major indexes, chipmakers remained under pressure.
The selloff followed a report that Meta Platforms could sell excess computing capacity to external customers.
The development raised concerns that major technology companies may be looking to reduce heavy spending on artificial intelligence infrastructure while finding new ways to generate revenue from existing capacity.
Analysts at Vital Knowledge warned that this trend could trigger a sharper rotation away from AI chipmakers and component suppliers.
Micron, AMD and Other Chip Stocks Fall
Weakness in semiconductor shares continued during Thursday’s early trading.
Micron Technology and Western Digital moved lower, while Coherent and Marvell Technology also declined.
AMD, Intel and Microchip Technology were among the other chip-related companies facing selling pressure.
Investors will continue to monitor labor market data, Federal Reserve signals and technology spending trends for the next direction in U.S. stocks.
