Meta Platforms and Amazon.com spurred Friday's big stock market rally, with the S&P 500 racing to a record high. But give a lot of the credit to Fed Chief Jerome Powell.
The Federal Reserve chairman slammed stocks Wednesday afternoon when he said a Fed rate cut in March was unlikely. But his comments otherwise were dovish.
"We don't look at stronger growth as a problem," Fed chief Powell said. "We have six months of good inflation data."
Notably, Powell stressed that "We're not looking for a weaker labor market."
At the time, that comment didn't seem crucial. Earlier on Wednesday, the ADP Employment Report estimated that private payroll growth slowed to just 107,000 in January.
But Friday's jobs report told a different picture. The U.S. added 353,000 jobs last month, the Labor Department said, more than twice as much as expected. Average hourly earnings jumped 0.6% vs. December, double forecasts.
While there are reasons to question the magnitude of the job and wage gains, the report pointed to significant economic and labor strength.
And yet, Wall Street took Friday's jobs report in stride. The major indexes opened mixed but quickly marched higher, with the S&P 500 and Dow Jones hitting record highs and the Nasdaq just touching a two-year best.
Clearly, Meta Platforms, Amazon and other big techs led the way on Friday. The Nasdaq rose 1.7% while the Russell 2000 fell 0.5%. The Invesco S&P 500 Equal Weight ETF edged down 0.1%, though it climbed 0.4% for the week, near 52-week highs.
But without Fed chief Powell's comments on economic growth and especially labor markets, the January jobs report could have triggered a sharply negative reaction on Wall Street.
The jobs report did further reduce market odds of a March rate cut to about 20%. The chances of a Fed rate cut by May 1 remain high, though reduced to 73%.
But, notably, Wall Street is still betting on six quarter-point cuts for the full year.
If the Fed is willing to cut interest rates significantly in 2024 despite solid economic growth, it would be a powerful tailwind for stocks.
Powell, in a "60 Minutes" interview that aired Sunday night, reiterated Wednesday comments that a March rate cut is unlikely. "It's not likely that this committee will reach that level of confidence in time for the March meeting, which is in seven weeks. So, I would say that's not the most likely or base case."
He added that the Fed is likely to cut rates by less than markets expect.
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