Closing Bell: U.S. Stocks Rally as Fed Rate Hike Odds Fall, Semiconductors Rally

There was a silver lining in rosy clouds Friday: U.S. Stocks rose as traders interpreted July labor market contraction as a sign the Fed can leave monetary policy on hold for now. 

The S&P 500 (SPX) was up 0.62% while the tech-heavy Nasdaq-100 (NDX) rallied 1.19%. The Dow Jones Industrial Average ($DJI) was up 151 points or 0.28% on Friday while the small-cap Russell 2000 (RUT) rose 1.1%. 

For the week, the SPX rose 3.6%. Technology led gains for the week with the tech-heavy NDX up 5.1% and the Philadelphia Semiconductor Index (SOX) jumping 9.3%. The Dow was up 3% last week while the small-cap RUT rose 3.5%.  

Oil prices fell about 11% for the week to settle just below $77 a barrel. 

Three things to know from Friday's market: 

Fed Watch: Fewer Jobs, Steady Interest Rates?  

The U.S. labor market unexpectedly contracted in July, shedding 23,000 jobs, while economists had expected a gain of 85,000 jobs. The Bureau of Labor Statistics also included large downward revisions to previous months. The unemployment rate fell to 4.1% from 4.2%; the labor force participation rate was at its lowest level in more than five years. The net result was a drop in yields, and a drop in the odds of a Federal Reserve Open Market Committee Sept 16 interest rate increase to 42% Friday from above 58% just last week, according to the CME FedWatch tool.  

Software Stocks Surge after Selloff  

After a significant selloff Thursday, software stocks surged Friday. Atlassian (TEAM) skyrocketed more than 35% to $149.07 after it reported earnings and gave guidance that beat estimates. Bank of America upgraded the stock from Neutral to Buy with a $175 price target. Twilio (TWLO) reached a new four-year high intraday, surging nearly 25% on the day, following second-quarter earnings that beat analyst expectations. Cloudflare (NET) rose to an all-time high before settling 5.6% higher on a strong second-quarter beat, with analysts increasing their price targets. 

There Were Some Very Big Movers:  

• Airbnb (ABNB) surged more than 17% Friday following its second-quarter earnings report, alongside an upgraded full-year revenue growth outlook.  
• The Trade Desk (TTD), down more than 21% Friday, was the biggest S&P decliner on Friday. It reported lackluster 3% revenue growth and third-quarter guidance that fell far below expectations, according to reports. In addition, it also said it is replacing its chief financial officer, chief marketing officer, and another leader.  
• Semiconductor chip photonics maker Coherent Corp (COHR) rose 44% in five sessions on news that the U.S. would restrict Chinese optical transceivers, and a JPMorgan price target increase to $435 from $380.  
• SpaceX (SPXC) had its best week as a public company, with a spike Friday that reversed mid-week declines and put the stock up nearly 23% on the week. Its first earnings report beat expectations but fueled AI capex worries. 

Angrej Singh and Tom White contributed to this article 

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