June 2 (Reuters) – U.S. stocks rose on Friday after a labor market report showing moderate wage growth in May indicated the Federal Reserve may avoid a rate hike in two weeks. Investors welcomed the Washington deal.

The tech-heavy Nasdaq Index (.IXIC) rose to a 13-month intraday high and posted its sixth-straight weekly gain, marking its best winning streak since January 2020.

U.S. job growth accelerated in May, but the unemployment rate rose to a seven-month high of 3.7% as more people sought employment and labor market conditions eased, the Labor Department said.

The unemployment rate rose to a 53-year low of 3.4% in April, reflecting a drop in domestic employment and a rise in the overall workforce. A larger labor pool eases the pressure on businesses to raise wages and help reduce inflation.

“Wage rates aren’t increasing as fast as they do in terms of the number of people actually working,” said Kim Forrest, chief investment officer at Bokke Capital Partners in Pittsburgh. “That’s a smoothing effect and it’s the mythical soft landing? It seems so.”

The data gave relief to investors who expect the central bank to hold off on raising rates at its June 13-14 policy meeting. It was the first stop since the central bank began tightening its aggressive anti-inflation policy a year ago.

But some pointed to the hotter-than-expected jobs data as a sign that the central bank has yet to rein in inflation.

“It is our view and remains that the market is completely wrong in assessing what the Federal Reserve is doing,” said Bill Orlando, chief equity strategist at Federated Hermes in New York.

“The market’s perception is that this economy is going to cool down, inflation is going to fall and the Fed is going to turn around and cut interest rates. That’s wrong.”

Fed funds futures showed a 66.6% probability the Fed will keep rates steady in two weeks, up from 79.6% on Thursday, according to CME Group’s FedWatch tool.

Markets now await key consumer price data a day ahead of the central bank’s rate decision.

The Senate passed a bill late Thursday to raise the government’s $31.4 trillion debt ceiling, which would have been a devastating, first-ever default.

The poll eased investor anxiety as the CBOE volatility index (.VIX), a gauge of Wall Street’s fears, fell to its lowest level since November 2021.

Unofficially, the Dow Jones Industrial Average (.DJI) was up 700.89 points, or 2.12%, at 33,762.46, while the S&P 500 (.SPX) was up 61.13 points, or 1.45%, at 4,282.15 (Nasdaq3X). , or 1.07%, 13,240.77.

Shares of Verizon Communications Inc ( VZ.N ), AT&T Inc ( TN ) and T-Mobile US Inc ( TMUS.O ) fell after a report said Amazon.com Inc ( AMZN.O ) was in talks with U.S. telcos. Low-cost wireless services for its Prime members. Amazon shares soared.

All 11 S&P 500 sectors advanced, with the commodities index ( .SPLRCM ) leading and the consumer discretionary sector ( .SPLRCD ), housing Amazon, lagging behind.

Nvidia Corp ( NVDA.O ) fell for a second day on Wednesday after briefly entering the elite club of megacap stocks valued at $1 trillion or more, on hopes that artificial intelligence will deliver significant future returns.

But Nvidia’s nearly 170% year-to-date rise highlights that most other companies are treading water while investors balk at the dominance of megacaps in the market.

“No one has really explained to me how they’re going to make money off of it,” said Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management in Punta Gorda, Florida. “A company like Nvidia has gone up so much in such a short period of time, it doesn’t make any rational sense.”

Reporting by Herbert Lash, additional reporting by Shreyashi Sanyal, Sristi Achar A and Shashwat Chauhan in Bangalore; Editing by Nivedita Bhattacharjee and Maju Samuel

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