Wall St rallies as jobs, services data calm rate hike worries

Wall Street's main indexes all gained more than 2% on Friday after December payrolls expanded more than expected even as wage increases slowed and services activity contracted, easing worries about the Federal Reserve's interest rate hiking path.
U.S. nonfarm payrolls rose by 223,000 jobs in December, Labor Department data showed, while a 0.3% rise in average earnings was smaller than expected and less than the previous month's 0.4%.
In another set of data, U.S. services activity declined for the first time in more than 2-1/2 years in December as demand weakened, with more signs of inflation easing.
Friday's rally boosted the benchmark S&P and the Nasdaq enough to snap four weeks of declines. For the holiday-shortened week, the S&P rose 1.45% while the Nasdaq added 0.98% and the Dow advanced by 1.46%.
For the gains, John Augustine, chief investment officer at Huntington National Bank in Columbus, Ohio, pointed to a calming of anxiety that the Fed would raise rates so much that it causes a recession.
"Today's reports may alleviate that pressure to force a recession. They may already have slowed down the economy enough. They just need validation from inflation reports."
Still the Fed last month projected an a interest rate target peak of around 5% and said it would keep rates high until inflation is where it wants it to be.
Fed officials on Friday acknowledged cooling wage growth and other signs of a gradually slowing economy, with Atlanta President Raphael Bostic hinting at the chance of a quarter percentage point hike at the next policy meeting.
But Huntington's Augustine said the central bank needs to see further slowing of price increases in the December inflation report, due out on Thursday, before deciding whether to slow its next rate hike. It raised rates 50 basis points in December.
Also next week several of the biggest U.S. banks including JPMorgan and Bank of America will kick off the fourth-quarter earnings season on Friday.
"That's the part of the puzzle people haven't been able to figure out. How much should earnings estimates be cut for the calendar year or have they been cut enough?" said Horneman at Verdence.
All the major S&P 500 indexes gained with materials' 3.44% increase leading the pack. Interest-rate sensitive technology was next with a 2.99% gain.
The weakest sector was healthcare, which rose 0.89% followed by energy's 1.68% increase.
Consumer staples was boosted by $Costco(COST.US)$, whose shares jumped 7% after the membership-only retailer reported strong December sales growth.
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$Pfizer(PFE.US)$ shares advanced 2.5% after reports of talks with China to secure a license that will allow domestic drugmakers to manufacture and distribute a generic version of the U.S. company's COVID-19 antiviral drug Paxlovid in China.
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