NEW YORK – Wall Street's big rally let off the accelerator on Friday, despite a better-than-expected report on the U.S. job market, amid worries about worsening U.S.-China tensions and whether Washington can deliver more aid for the economy.
The S&P 500 inched up 2.12 points, or 0.1%, to 3,351.28 to eke out a sixth straight gain, after being down most of the day. It's back within 1% of its record for the first time since February. The Dow Jones Industrial Average added 46.50, or 0.2%, to 27,433.48.
Technology stocks took losses, though, on worries that China could retaliate for President Donald Trump's latest escalation against Chinese tech companies. The Nasdaq composite dropped 97.09, or 0.9%, from its record to 11,010.98. It's a rare stumble for big tech stocks, which have soared on expectations they can keep raking in profits regardless of the pandemic.
"The Chinese aren't going to take this lightly," said Quincy Krosby, chief market strategist at Prudential Financial. "They've already suggested they might take it to court. The point is the market is projecting we're going to see a ratcheting up of tensions between the U.S. and China, and it could focus on technology."
The day's headline economic report was an encouraging one for investors: The U.S. job market strengthened by more last month than economists had forecast, with employers adding 185,000 more jobs than the nearly 1.6 million that investors expected to see. Analysts said they found some encouraging trends throughout the report, such as a stronger-than-expected rise in average hourly earnings.
"Yes, future employment data will likely slow due to more COVID-19 restrictions, but for now you have to be quite impressed with how far we've come the last few months," Ryan Detrick, chief investment strategist for LPL Financial, said in a statement.
Several areas of the market that tend to rise when investors upgrade their expectations for the economy rallied.
Stocks of smaller companies climbed more than their bigger rivals, and the Russell 2000 index of small-cap stocks jumped 24.56, or 1.6%, to 1,569.18. Treasury yields also rose. Financial stocks, which have swung sharply with prospects for the economy and interest rates, had the biggest gain of the 11 sectors that make up the S&P 500. Seven out of 10 stocks within the index rose for the day.
Still, the job report also showed that hiring slowed in July after two months of acceleration, and the job market remains far below where it was before the pandemic.
Analysts said the better-than-expected jobs report may also have removed some of the urgency from talks on Capitol Hill, where Congress and White House officials have been negotiating on a hoped-for deal on more aid for the economy.
"The market clearly believes that a package is necessary to cushion the downside of the pandemic-induced slowdown in the economy," Prudential Financial's Krosby said.