S&P 500 rises as it wraps up banner week with traders seeing bright side of dismal jobs report

The S&P 500 rose on Friday as traders interpreted an unexpected loss of jobs in July as meaning the Federal Reserve won’t need to raise interest rates soon and can leave monetary policy on hold for now.

The broad market index advanced 0.5%, while the Nasdaq Composite outperformed, climbing 1%. The Dow Jones Industrial Average added 95 points, or 0.2%.

Stocks are headed for a second straight week of gains. The S&P 500 — which closed above 7,700 for the first time ever earlier this week — has risen more than 3% week to date. The Nasdaq could post its best weekly performance since April with a rise of almost 5%, thanks to a bounce-back in chip stocks. The iShares Semiconductor ETF (SOXX) is higher by about 7% this week. The Dow, on the other hand, has risen close to 3% this week.

July’s nonfarm payrolls report showed a drop of 23,000 jobs, while economists polled by Dow Jones had forecast a gain of 83,000. The unemployment rate fell to 4.1% as the labor force participation rate fell to its lowest level in more than five years. Economists had expected it to remain unchanged at 4.2%.

A majority of fed funds futures traders now expect that the central bank will hold its benchmark lending rate at the current 3.50% to 3.75% at the next policy meeting in September, per the CME FedWatch tool. Just a day ago, traders were pricing in a 55% chance of a quarter-point hike.