The S&P 500 inches higher; Treasury yields dip after Powell remarks, jobs report

NEW YORK — The S&P 500 posted a nominal gain and Treasury yields edged lower on Friday, as remarks from Federal Reserve chief Jerome Powell firmed interest rate cut expectations and China announced an economic stimulus package, both of which helped offset weaker-than-expected U.S. jobs data.

The roller-coaster week began with a flight to safety driven by trade jitters and weak U.S. manufacturing data, but positive geopolitical developments in Britain, Hong Kong and Italy, along with news that U.S.-China trade talks would continue, revived market risk appetite.

That appetite was further stoked after China’s central bank said it would lower the amount of cash that banks must hold as reserves, in order to bolster the nation’s weakening economy.

“Over the week we’ve seen risk assets rebound as favorable economic data and positive geopolitical developments provided comfort to investors that a broad slowdown isn’t about to take shape,” said Charlie Ripley, senior market strategist for Allianz Investment Management in Minneapolis.

But optimism was dampened by the U.S. nonfarm payrolls report, which showed an increase of 130,000 jobs in August, fewer than analysts expected.

The underwhelming data provided another possible sign that the longest-ever period of U.S. economic expansion is losing steam and increased the likelihood that the Fed will cut rates when it meets later this month.

But Ripley believes the jobs report was not as downbeat as the headline number suggested.

“We still have an unemployment rate at 3.7% and wages are increasing at a decent clip,” Ripley said.

“Beyond that we had favorable comments from Powell, which helped alleviate investor concern.”

Indeed, in remarks made at a panel discussion in Zurich, Powell called the jobs report consistent with a strong labor market, adding that despite trade uncertainties he does not foresee or expect a U.S. recession.

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