Stocks Climb on Surprisingly Upbeat Jobs Report
June 05 2020 - 12:03PM
Dow Jones News
By Avantika Chilkoti, Akane Otani and Joanne Chiu
U.S. stocks ripped higher Friday and the Nasdaq Composite
vaulted above its closing record after data showed the economy
defied expectations to add jobs in May.
The Dow Jones Industrial Average climbed 984 points, or 3.8%, to
27268 shortly after the opening bell. The S&P 500 advanced 3%
and the Nasdaq Composite climbed 2.1%, heading toward a fresh
closing high.
The Labor Department said the economy added 2.5 million jobs in
May. Economists surveyed by The Wall Street Journal had expected a
loss of 8.3 million jobs. The unemployment rate also unexpectedly
fell, clocking in at 13%, compared with estimates of 20%.
All together, the report suggests the economy is recovering
faster than many had expected from the fallout caused by the
coronavirus pandemic. That added fuel to a stock rally that has put
major indexes on course for big weekly gains.
Investors have been betting that the country will be able to
both contain the spread of the coronavirus and reopen businesses in
the coming months. Many are pricing in a "V-shaped" recovery: a
sharp upturn in spending and growth that follows a short, painful
collapse in economic activity.
Friday's jobs report appeared to be the clearest indication yet
that the economy may be able to pull out of a downturn faster than
investors had expected.
Something like this builds credibility for what the stock market
has been telling you," said Brian Belkin, chief investment
strategist for BMO Capital Markets. "There's a massive amount of
negativity among macro analysts. But the proof is in the
pudding."
Some investors urge caution, though.
Massive stimulus packages and the loosening of restrictions on
business and travel across the world appear to have helped drive
the stock market's recent surge. But many are fearful the gains may
only be temporary.
Further government intervention might be needed to support
businesses if activity doesn't rebound by the third quarter, said
Daryl Liew, chief investment officer at REYL Singapore.
Stock gains were broad Friday, with all 11 sectors of the
S&P 500 rising early in the trading session.
Shares of cyclical companies -- whose profits are closely tied
to the fate of the economy -- were among the biggest gainers.
Caterpillar jumped 5.7%, while Boeing rose 18%.
Bank stocks also posted big gains, with Bank of America up 6.7%
and Goldman Sachs Group rising 3%.
Elsewhere, the Stoxx Europe 600 benchmark rose 2.5%. On
Thursday, the European Central Bank scaled up its bond-buying
program and Germany adopted its second economic-stimulus package
since the start of the coronavirus pandemic.
"It's a step in the right direction from the European leaders
and shows some unity," said Brian O'Reilly, head of market strategy
for Mediolanum International Funds. Rising bond yields help banks,
which borrow short-term to lend long-term, boosting
profitability.
In Asia, Hong Kong's Hang Seng benchmark rose 1.7% and South
Korea's Kospi rallied 1.4%.
Michael Wursthorn contributed to this article
Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com, Akane
Otani at akane.otani@wsj.com and Joanne Chiu at
joanne.chiu@wsj.com
(END) Dow Jones Newswires
June 05, 2020 11:48 ET (15:48 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.