(Updates with index/price moves, macroeconomic data and company/geopolitical news from the first paragraph.)
US equity indexes rose after a surprise drop in nonfarm payrolls lifted the odds for a monetary policy pause in September and sent government bond yields lower.
The Nasdaq Composite jumped 1.1% to 26,626.5, with the S&P 500 up 0.5% to 7,750.4 and the Dow Jones Industrial Average higher by 0.2% to 54,985.1.
Consumer discretionary, materials, and technology were among the top gainers in a broadly positive tape, while energy and financials led decliners.
The July employment report showed nonfarm payrolls fell by 23,000, compared with the 80,000 jobs increase expected in a Bloomberg-compiled poll. Private payrolls rose by 30,000 in July, the same as in June but below the 82,000 expected. Government sector jobs decreased by 53,000.
The unemployment rate fell to 4.1% in July from 4.2% in June, compared with a forecast of 4.2%, after the labor force participation rate declined to 61.4% from 61.5% and the labor force contracted.
Looking past the government decline, the increase in private payrolls was below the lowest forecast, Jefferies Chief US Economist Thomas Simons said in a note. Large declines in leisure and hospitality, retail trade and financial services offset strength in construction and healthcare and social assistance, Simons said, adding that the next move from the Federal Reserve is an interest-rate cut, and most likely in December.
The probability of the Federal Reserve keeping its target rate unchanged at 3.5%-3.75% in September surged to 56% on Friday from 45% a day ago and 33% a week ago, according to the CME FedWatch tool.
US Treasury yields fell, with the 10-year yield down 1.9 basis points to 4.65% and the two-year lower by 4.6 basis points to 4.20%.
Gold futures jumped 2.4% to $4,399.9, and silver futures surged 3.1% to $63.53.
In geopolitical news, an Iranian official said a framework on the Strait of Hormuz has been agreed with Oman, with "a final decision to be made at higher levels," Al Jazeera, a Middle Eastern broadcaster, reported, citing Iranian state media. The deal would not automatically reopen the waterway, Tehran's deputy foreign minister said, according to CNN.
The Saudi crown prince, Turkish president and Pakistani prime minister have signed a joint defense deal in Mecca stating that "any armed attack against any one of the three states shall be regarded as an attack against them all," Al Jazeera reported. Pakistan is one of the few countries in the world with nuclear weapons.
The front-month US West Texas Intermediate crude oil contract jumped 1.5% to $78.41 a barrel, and global benchmark North Sea Brent advanced 1.5% to $83.74 a barrel.
In company news, Microchip Technology's (MCHP) strong fiscal Q1 results were buoyed by better cyclical trends and structural tailwinds from its data center and aerospace and defense segments, Morgan Stanley said in a Friday note. Shares of Microchip soared 14%, one of the top gainers on the S&P 500 and Nasdaq.
Airbnb (ABNB) reported stronger Q2 bookings as product changes contributed to higher revenue in the quarter, RBC Capital Markets said in a Friday note. Shares surged 15%, one of the biggest gainers on the S&P 500 and the Nasdaq.
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