Dow rises as S&P 500 hits record after weak jobs data eases Fed fears

US stocks ended higher on Friday, with the S&P 500 closing at a record high as weaker-than-expected July jobs data reduced expectations for a Federal Reserve interest rate hike in September and boosted investor appetite for technology and growth stocks.

The S&P 500 rose 0.6% to finish at 7,756.44, while the Nasdaq Composite climbed 1.3% to 26,690.62.

The Dow Jones Industrial Average gained 151 points, or 0.3%, to close at 54,036.43.

The gains capped a strong week for Wall Street, with all three major indexes recording their best weekly performance since April.

The S&P 500 and Dow each advanced more than 3% during the week, while the Nasdaq gained around 5%, supported by a rebound in semiconductor shares. The iShares Semiconductor ETF (SOXX) also climbed about 7% over the week.

Weak jobs report shifts Fed expectations

Investor sentiment improved after the Labor Department reported that nonfarm payrolls fell by 23,000 in July, compared with economists' expectations for an increase of roughly 80,000 to 83,000 jobs.

Payroll figures for the previous two months were also revised sharply lower.

Despite the decline in employment, the unemployment rate eased to 4.1% from 4.2% as labor force participation fell to its lowest level in more than five years.

The weaker labor market data prompted traders to scale back expectations for another Federal Reserve rate increase.

According to the CME FedWatch tool, the probability of a September rate hike fell to about 44%, down from 55% a day earlier and around 67% a week ago.

The employment report reinforced expectations that the central bank could leave interest rates unchanged at its September meeting, particularly as Federal Reserve Chair Kevin Warsh has provided limited forward guidance, leaving markets increasingly focused on incoming economic data.

Earnings fuel rally in technology and software stocks

Corporate earnings remained another key driver of market performance, with strong quarterly results helping offset concerns surrounding AI-related spending and enterprise software demand.

Atlassian was among the session's biggest gainers, soaring about 36% after reporting stronger-than-expected fiscal fourth-quarter earnings and revenue while issuing upbeat guidance.

Cloudflare gained around 4% after raising its full-year and current-quarter outlook, reflecting continued demand for its cloud cybersecurity and AI-related offerings.

Airbnb also rallied roughly 15% after the vacation rental platform exceeded Wall Street's expectations on both revenue and earnings for the second quarter.

Microchip Technology also advanced after forecasting quarterly revenue above analyst estimates, while SpaceX rose following the expiry of the first of several post-IPO share lockup restrictions.

With earnings season nearing completion, more than 85% of S&P 500 companies that had reported results through Friday morning exceeded analyst expectations, according to LSEG data.

Oil prices edge lower as markets monitor Middle East

Oil prices finished modestly lower as investors continued monitoring diplomatic developments surrounding the Strait of Hormuz.

West Texas Intermediate crude for September delivery settled 0.35% lower at $77.02 per barrel, while Brent crude fell 0.44% to settle at $82.13 per barrel.

Markets continued to watch reports that the United States and Iran were making progress toward an agreement to reopen the Strait of Hormuz, a key global energy shipping route.

Expectations that tensions could eventually ease helped keep broader inflation concerns in check, supporting equities even as crude prices posted gains during the session.