U.S. regional bank stocks led a rebound in Wall Street shares on Friday, but government bond prices fell after strong jobs data revived concerns that the Federal Reserve will keep interest rates high for too long.
Shares of PacWest and Western Alliance rose 83 percent and 38 percent, respectively, in New York, after falling sharply in the previous session on renewed concerns about the sector’s health.
Wall Street’s benchmark S&P 500 rose 1.4 percent after Thursday’s sell-off. The tech-heavy Nasdaq composite was up 1.8 percent, Apple rose 4.8 percent after first-quarter earnings and the computer maker’s profit fell short of analysts’ forecasts. The KBW regional banking index rose 4.6 percent, reversing losses in the previous session.
Monthly data showed the U.S. economy added 253,000 jobs in April, more than the 180,000 expected by economists polled by Reuters, as bank stocks steadied. The unemployment rate fell to 3.4 percent, down from a 50-year low of 3.5 percent. Economists had expected a slight increase to 3.6 percent.
Investors were watching the numbers for signs that the U.S. economy is slowing, raising doubts about whether the central bank will start cutting interest rates as soon as expected.
Richard Flynn, managing director of Charles Schwab UK, said the strong figures would only add to concerns that “the US economy is still tepid in the Federal Reserve’s view”.
The yield on interest-rate-sensitive two-year Treasuries edged up 0.21 percentage points to 3.93 percent, as U.S. government debt sold off sharply.
In Europe, the regional Stoxx Europe 600 advanced 1.1 percent and London’s FTSE 100 added 1 percent. Sterling strengthened 0.6 percent against the dollar to $1.265, its highest point since May last year.
Germany’s Dax rose 1.4 percent, led by an 8.9 percent gain for sportswear maker Adidas, even after figures showed German factory orders fell 10.7 percent in March, a bigger drop than economists had expected. That raised fears of a sharp slowdown in Europe’s biggest economy.
The European Central Bank raised interest rates by a quarter percent on Thursday, a slowdown from previous increases, but warned that the fight against inflation is far from won. The ECB’s main deposit rate rose to 3.25 percent from minus 0.5 percent in 11 months, its fastest tightening cycle.
Some analysts think rates are near peak levels. “For all the resilience of the euro area banking sector, the US experience should be a cautionary tale,” said Frédéric Ducrochet, head of macroeconomic research at Pictet Wealth Management. “We expect the ECB to stop raising rates by the summer.”
In commodity markets, crude oil rose 3.6 percent to $75.08 a barrel, while its U.S. counterpart WTI rose 3.8 percent to $71.13 a barrel.