U.S. stocks finished the week on a positive note as investors welcomed a disappointing July employment report, viewing weaker labor market conditions as reducing the need for additional Federal Reserve interest rate hikes.

The S&P 500 rose 0.4%, extending its record-setting rally after closing above 7,700 for the first time earlier in the week. The Nasdaq Composite gained 0.9%, while the Dow Jones Industrial Average added 36 points, or 0.1%.

The gains capped a second consecutive week of advances across major U.S. equity indexes.

Weak Jobs Report Shifts Fed Expectations

Investor sentiment improved after the July nonfarm payrolls report showed the U.S. economy unexpectedly lost 23,000 jobs, compared with economists’ expectations for an increase of 83,000 jobs.

The unemployment rate edged down to 4.1%, although the decline was largely attributed to a drop in labor force participation, which fell to its lowest level in more than five years.

Following the report, interest rate expectations shifted sharply. Most futures traders now anticipate the Federal Reserve will keep its benchmark interest rate unchanged at 3.50% to 3.75% during its September policy meeting. Just one day earlier, markets had assigned a 55% probability to another quarter-point rate increase.

Lower expectations for additional monetary tightening also helped stabilize Treasury yields, providing further support for equities.

Earnings Season Continues to Drive Market Higher

Strong corporate earnings remained another major catalyst behind the market’s advance.

Software companies led Friday’s gains as recent earnings reports eased concerns that artificial intelligence would significantly disrupt established enterprise software providers.

Cloudflare gained after issuing stronger-than-expected full-year guidance, while Atlassian surged following quarterly results that exceeded analyst expectations and included upbeat forward guidance.

Airbnb also posted double-digit gains after reporting better-than-expected quarterly earnings and revenue.

Semiconductor stocks continued their strong rebound, with the iShares Semiconductor ETF (SOXX) gaining approximately 7% for the week as investors returned to AI-related technology names.

Oil Prices Rise as Markets Monitor Iran Negotiations

Energy markets remained focused on developments in the Middle East.

West Texas Intermediate crude traded near $78 per barrel, while Brent crude hovered around $83 per barrel as investors continued monitoring negotiations between the United States and Iran regarding the potential reopening of the Strait of Hormuz.

Although geopolitical tensions remain elevated, investors continue to expect diplomatic efforts could eventually restore more stable shipping conditions through one of the world’s most important energy corridors.

SpaceX Extends Recovery

Among individual stocks, SpaceX gained approximately 12% on Friday, putting the company on track for its first positive weekly performance in over a month.

The rally followed an analyst upgrade from Argus, which reiterated a $160 price target, implying meaningful upside from recent trading levels.

Investor sentiment also improved after concerns surrounding insider share unlocks appeared to have been largely priced into the stock earlier in the week.

Closing Insights

U.S. equities ended the week on a strong note as investors balanced weaker economic data against improving monetary policy expectations and another solid round of corporate earnings. While the softer jobs report raised concerns about slowing economic growth, markets interpreted it as reducing the likelihood of further Federal Reserve tightening. Combined with resilient earnings and renewed strength in technology shares, the outlook remains constructive, though investors continue to monitor inflation, labor market conditions, and geopolitical developments for signs that market sentiment could shift.