S&P 500 Weekly Gain Led by Financials, Comm Services

The S&P 500 wrapped up the week with gains, led by financials and communication services. The index finished Thursday's session mixed after a weaker-than-expected June jobs report, which reduced the odds of another Federal Reserve rate hike in July.

Nonfarm payrolls increased less than forecast, the Labor Department said. The unemployment rate ticked up, and wage growth moderated. Bond yields fell sharply on the data. The 10-year Treasury yield dropped nine basis points to 3.95%, its lowest in three weeks.

Lower yields shifted sector leadership. Financials climbed on expectations that the Fed could pause its tightening cycle. Communication services rallied, with heavyweights like Meta Platforms and Alphabet gaining for the week. Energy lagged as crude oil prices slipped.

Traders said the jobs data confirmed the economy is cooling. The data reinforced bets on a rate hold at the July meeting. The CME FedWatch tool showed a 60% probability of no hike, up from 30% a week earlier.

The weaker dollar aided multinational companies in the S&P 500. The dollar index fell 0.7% on Thursday, its biggest one-day drop in a month. The euro rose to $1.097, its highest since May.

The breadth of the weekly gain was narrow. The top five stocks by market cap accounted for a large share of the index's move. The S&P 500's concentration in a handful of mega-caps has been a theme, as covered in our analysis of the index's top-heaviness. market analysis

Financials benefited from a steepening yield curve. The spread between 2-year and 10-year Treasuries widened to 95 basis points from 88 basis points a week ago. Banks lend long and borrow short, so a steeper curve improves net interest margins. Regional bank stocks such as KeyCorp and Comerica posted strong weekly gains.

Communication services were supported by a rotation into growth stocks after yields fell. Lower discount rates make future earnings more valuable, boosting high-duration sectors. Alphabet rose 2.5% for the week. Meta Platforms added 3.1%.

The week's gains trimmed the S&P 500's year-to-date decline. The index remains about 8% below its all-time high, set in January 2022.

Friday's session will be the last trading day of the week. No major economic data is scheduled. The focus will shift to second-quarter earnings season, which begins next week with reports from major banks.