US stocks climbed toward all-time highs, the dollar strengthened and Treasury yields fell after a report showed the economy is adding jobs with few signs of inflation and President Donald Trump pressured the Federal Reserve to sustain growth.
“On the bigger picture, it looks like a very strong labour market is a good sign for the economy, but low inflation is also attractive for financial markets,” said John Vail, chief global strategist at Nikko Asset Management, which has around $202 billion in assets under management. “So it’s a bit of a Goldilocks situation.”
The S&P 500 index rose for a seventh consecutive day, the longest rally since 2017, and approached the record high reached in September. Global stocks edged higher earlier following remarks from both China and the US that progress was being made in trade talks. The pound weakened after UK Prime Minister Theresa May asked the EU to delay Brexit to June 30.
Payrolls rose by 196,000 in March, a Labor Department report showed. The median estimate in a Bloomberg survey saw an increase of 177,000. Wage gains eased and the unemployment rate held near a 49-year low.
The data signal the labour market is solid enough to support economic growth in coming months even if job gains are moderating from last year’s pace. Unemployment near historic lows bodes well for consumer spending, though weaker wage gains suggest inflation will be even more muted as Fed policymakers wait to see how the US economy weathers a global slowdown.
“This a perfect report for the Fed because it actually corroborates what they’ve been saying all along, which is there are no wage pressures,” Subadra Rajappa, head of US rates strategy at Societe Generale, said in a Bloomberg Television interview. “There’s very little risk of wage inflation.”
The data come as investors expect an interest-rate cut this year after four hikes in 2018. The Fed early in 2019 removed projections for rate rises in the near term while flagging increasing economic risks amid slowing global growth.
“This report came out right in the sweet spot, where it still showed that employment and the labour market are still solid, which will underpin a strong consumer moving forward,” said Shawn Cruz, TD Ameritrade’s manager of trader strategy.
Even so, Trump said the Fed should cut interest rates and stop shrinking its balance sheet, maintaining his pressure on the central bank over its monetary policy. The Fed’s interest rate increases last year outraged the president, who even discussed firing the central bank’s chairman, Jerome Powell.
“He’s made these kinds of comments before,” said Olivia Engel, chief investment officer for active quantitative equities at State Street Global Advisors. “I think the market is focused on other things like the real sources of earnings, the real state of the economy.”
Chinese President Xi Jinping is pushing for a rapid conclusion to the negotiations with the US, while Trump on Thursday talked up prospects for a “monumental” agreement that may still be some weeks away. The improved tone in the talks has helped drive the recent rally in equities, with the MSCI All Country World Index touching a six-month high this week.