Wall Street’s main indexes closed higher on Friday on news that while US payrolls expanded more than expected, wage increases slowed and services activity contracted, easing worries about the Federal Reserve’s interest rate hiking path.

The Dow Jones Industrial Average soared 700.53 points, or 2.1%, to 33,630.61, the S&P 500 climbed 2.3% and the Nasdaq was up 2.6%.

The nonfarm payrolls rose by 223,000 jobs in December, data from the Labor Department showed, while a 0.3% rise in average earnings was smaller than expected and lower than the previous month.

The numbers for November were revised to show nonfarm payrolls rose by 256,000 and average earnings grew by 0.4%.

Another set of data showed US services activity contracted for the first time in more than 2-1/2 years in December amid weakening demand, with more signs of inflation abating.

“We got good news on the inflation front with wage gains that are slowing. We got participation rates pick up again and yet we’re still creating jobs. It’s a kind of a win-win for the economy. And on the other side the ISM services report was really weak and broadly weak,” said Megan Horneman, chief investment officer at Verdence Capital Management in Hunt Valley, Md.

“That’s basically making people think the Fed is nearing the end of what’s been one of the most aggressive tightening cycles we’ve seen in decades. That’s why the markets are taking off.”

Big technology and other growth stocks such as Microsoft, Apple and Meta Platforms rose between 1% and 4%, helped by a decline in the 10-year US Treasury yield. 

Tesla rose 2.5% even after the company cut electric-car prices in China for the second time in less than three months.

A resilient labor market has powered the economy through consumer spending, but could prompt the Fed to lift its target interest rate above the 5.1% peak it had projected last month and keep it there for a while.

Earlier this week, minutes from the Fed’s December meeting showed that the central bank was laser-focused on fighting inflation even as officials agreed to slow the pace of rate hikes to limit risks to economic growth.

Money market bets of a 25-basis point hike in the February policy meeting shot up to 73% and the terminal rate was seen edging below 5% by June. 

Bed Bath & Beyond slid 23% after Reuters reported that the home goods retailer was preparing to seek bankruptcy protection in coming weeks.