U.S. stocks reversed from an earlier sell-off and jumped on Friday as a rally in bond yields eased, while a stronger-than-expected jobs report boosted optimism for a faster economic reopening.
The S&P 500 last traded up 1.4% after shedding 1% earlier. The Nasdaq Composite gained 1.4% in the volatile session. At its low of the day, the tech-heavy benchmark dropped 2.6%. The Dow Jones Industrial Average climbed 410 points.
The major averages bounced off their lows as bond yields retreated from their session highs. The 10-year Treasury yield last traded flat at 1.56% after popping above 1.6% to hit a 2021 high following data showing a surge in jobs growth.
The Labor Department on Friday reported nonfarm payrolls jumped by 379,000 for the month and the unemployment rate fell to 6.2%. That compared to expectations of 210,000 new jobs and the unemployment rate to hold steady from the 6.3% rate in January, according to Dow Jones.
Stocks that would benefit from a rapid economic comeback gained in the wake of the jobs report. The S&P 500 energy sector rose more than 3% as Occidental Petroleum gained nearly 6%. Financials and industrials rallied more than 1% each, while materials jumped 2%.
“This was a welcomed change of events for a suppressed labor market as we begin to turn the helm on a restrained economy and open back up,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “It appears the ship is pointed in the right direction and the additional stimulus coming from Congress should be the wind in the sails to get the economy back on track.”
Still, the spike in interest rates fueled fears that growth-oriented tech companies, which had led the market rally last year, may have a hard time living up to expectations if borrowing costs jump. Tesla tumbled more than 4%, bringing its weekly losses to 12%. Pandemic winners Peloton and Zoom Video have slid 19% and 14%, respectively, this week. Red-hot investor Cathie Wood, who focuses on innovative companies, saw her flagship fund lose double digits this week and wipe out its 2021 gains.
Friday’s moves followed a steep sell-off on Thursday triggered by Federal Reserve Chair Jerome Powell’s remarks on rising bond yields. The Fed chair said the recent runup caught his attention but he didn’t give any indication of how the central bank would rein it in. Some investors had expected Powell to signal his willingness to adjust the Fed’s asset purchase program.
The economic reopening could “create some upward pressure on prices,” Powell said in a Wall Street Journal webinar Thursday. Even if the economy sees “transitory increases in inflation … I expect that we will be patient,” he added.
“Equity investors, in our conversations, are really grappling with two things they may not have had to deal with for the last 10 years,” said Tom Lee, Fundstrat’s co-founder head of research. “One is the potential for inflation to actually have to be priced into equities. I think there’s a lot of confusion.”
“Then it’s a bond market that seems to be testing the Fed, which kind of scares people,” added Lee, who believes the sell-off this week is a buying opportunity.
— CNBC’s Maggie Fitzgerald contributed reporting