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Wall Street stocks rebounded Friday after U.S. job growth far exceeded economists’ expectations, signaling that the job market remains strong despite high interest rates.
The benchmark S&P 500 rose 0.6% just after the opening bell in New York, while the tech-heavy Nasdaq Composite gained 0.7%.
The United States created 303,000 jobs in March, well above the 200,000 forecast of economists polled by Reuters. According to the Bureau of Labor Statistics, the unemployment rate also unexpectedly fell from 3.9% to 3.8%.
The data signals that “the economy shows no signs of slowing and consumer spending should be able to hold up in the near term,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
The moves reversed some of the previous trading session’s heavy selling, which came as fears of escalating tensions in the Middle East pushed oil prices to five-month highs above $90 a barrel, raising concerns that a Persistent inflation may delay central banks from cutting interest rates.
The S&P 500 index fell 1.2% on Thursday, its biggest daily decline since mid-February, as traders weighed the potential for a widening conflict in the Middle East and possible Iranian retaliation for a suspected Israeli attack on its consulate in Damascus.
Stocks in Europe and Asia mirrored this decline on Friday.
By mid-afternoon the regional Stoxx Europe 600 index was down 1%, while the French Cac 40 and the German Dax were both down 1.3%. London’s energy-heavy FTSE 100 fared slightly better but still fell 0.9%.
Japan’s Topix closed 1.1% lower, while South Korea’s Kospi lost 1% and Hong Kong’s Hang Seng fell 0.4%.
Analysts said rising energy prices raise the possibility that the Federal Reserve and European Central Bank will lower interest rates more slowly this year.
“Oil’s surge is reviving stagflation fears,” said Emmanuel Cau, head of European equity strategy at Barclays.
Oil prices have risen in recent weeks as forecasts for global demand have begun to outpace supply growth and economic data have pointed to a stronger-than-expected economic recovery in the United States, Europe and China.
Brent crude, the international benchmark, traded at $91.26 on Friday, its highest level since last October.
Bob Ryan, commodities and energy strategist at BCA Research, said it would “not be a surprise” if prices hit $100 a barrel this year, given that the OPEC+ cartel of major oil producers looks set to maintain the voluntary production cuts that have successfully gotten inventories down.
Supply growth outside OPEC+ has also been weaker than previously expected, leading the International Energy Agency to predict in March that the oil market would be in a “slight deficit” this year , reversing its previous surplus forecasts.
“These levels are manageable,” said Francisco Blanch, head of global commodities at Bank of America. “If we go much higher – above $100 – we will cause serious problems for the Fed.”
Traders will be paying close attention to the latest non-farm payrolls and unemployment data from the United States, due on Friday, for further clues about the interest rate outlook in the world’s largest economy.