S&P 500 rebounds on hot jobs report – but it’s not all rosy

The Dow Jones Industrial Average rose as much as 0.7%, or 300 points, the S&P 500 climbed as much as 0.8% and the tech-heavy Nasdaq rallied as much as 1.2% and the small-cap Russell 2000 index rose 1.6% open shortly after launch, although gains were tempered by late morning trading.

“This morning’s report is good for stocks, and the economy continues to show incredible resilience,” Gina Bolvin, president of Bolvin Wealth Management Group, noted in her email comments, adding that she was “more optimistic than today I yesterday.”

This optimistic interpretation clearly had an impact on all stock markets, as the rise in hiring strengthened the case for continued U.S. economic strength, but the resilience of the labor market dampened hopes for what many investors had hoped for: extremely aggressive interest rate cuts to boost the economy to boost.

The market-implied probability of a second straight 0.5 percentage point cut in interest rates by the Federal Reserve at its meeting next month fell to 6% on Friday, compared with 32% a day ago and 53% a week ago, according to data from the derivatives trading activities observed by CME Group.

Fixed income assets fell accordingly as bond traders scaled back their bets that the Fed would quickly cut interest rates.

Two-year Treasury yields rose 15 basis points to a four-week high of 3.88%, compared with 3.56% last Friday, and 10-year Treasury yields rose 10 basis points to a two-month high of 3.97%. from 3.75% as of last Friday (higher bond yields mean less valuable bonds as investors demand higher annual payouts to hold government debt).