Stocks rose sharply Friday after the U.S. May jobs report showed a surprise 2.5 million jump in payrolls and a drop in the unemployment rate to 13.3% as businesses began to reopen from the COVID-19 pandemic lockdowns.
How are benchmarks performing?
The Dow Jones Industrial Average jumped 692.87 points, or 2.6%, to 26,974.69, while the S&P 500 rose 68.63 points, or 2.2%, to 3,180.98. The Nasdaq Composite advanced 160.03 points, or 1.7%, to 9,775.85.
On Thursday, the Dow ended 11.93 points, or less than 0.1%, higher at 26,281.82. The fourth straight gain matches a similar streak of wins for the blue-chip index ended April 27, according to FactSet data. Meanwhile, the S&P 500 fell 10.52 points, or 0.3%, to close at 3,112.35 and the Nasdaq Composite Index finished 67.10 points, or 0.7%, lower to wrap up the session at 9,615.81, putting the index about 2.1% from its Feb. 19 all-time closing high. Both the S&P 500 and the Nasdaq ended a win streak at four consecutive days with the session’s loss.
What’s driving the market?
The U.S. May unemployment rate fell to 13.3% from 14.7%, though the Bureau of Labor Statistics said the rate would have been 3 points higher if households had answered their forms correctly. The loss of jobs in April was revised up to 20.7 million from 20.5 million.
Economists polled by MarketWatch had predicted the loss of 7.25 million jobs and a May unemployment rate of 19%.
“At the very least, this report affirms that the economy is on the mend and employees are coming back to work after being temporarily unemployed as the unemployment rate declined from 19% to 13.3% with the participation rate moving higher,” said Charlie Ripley, senior investment strategist for Allianz Investment Management, in emailed comments. “Ultimately, this report provides additional confirmation for risk asset investors who are betting on a faster recovery of the economy.”
But market watchers cautioned against reading too much into the data, as well.
“One month does not make a trend, but the sharp turn in May justifies a bit more optimism about the near-term outlook,” said Jim Baird, chief investment officer at Plante Moran. “It’s still far too soon to know what the path back will look like, but the May employment report opens the door for an outcome that is less dire than the consensus view would suggest.”
Government financial relief measures to limit the harm from business closures have helped to support the economy and stock prices since they fell to lows in late March. Talk of additional funds from Congress could also deliver a fresh fillip to the risk assets, with Bloomberg News reporting that the Trump administration is considering a proposal that would see $1 trillion or more in a further round of economic stimulus that could include funds for infrastructure spending. Still, it is unlikely that such measures would occur until later in the summer, if at all, as lawmakers go on a recess.
On the other hand, the strength of the May jobs numbers could dent momentum for additional stimulus, analysts warned, even though the unemployment rate remains excruciatingly high.
The U.S. government has injected some $3 trillion in stimulus into the economy, while the Federal Reserve’s balance sheet rose to $7.21 trillion as of June 3, amid efforts to mitigate the severity of the economic downturn wrought by forced closures intended to limit COVID-19’s spread.
Those measures have been often cited as one of the key reasons that provided a runway for stocks to climb from the depths of the coronavirus selloff.
Outside of the labor-market report, a report on consumer credit for April will be released at 3 p.m. Eastern.
Which stocks are in focus?
- Slack Technologies Inc. revenue topped $200 million in a quarter for the first time, but the stock still sank. Shares were down 16%.
- PagerDuty Inc. shares were down 8% after the digital operations-management platform reported fiscal first-quarter results that exceeded Wall Street estimates.
- Shares of DocuSign Inc. after the company’s latest results showed a boost from companies that were looking for digital ways to execute agreements as the COVID-19 crisis made in-person meetings more difficult.
- Broadcom Inc. reported results late Thursday that were in line with Wall Street estimates and its outlook range bookended the analyst consensus. Shares were up 6%.
- Shift4 Payments Inc. priced its initial public offering at $23 a share Thursday night, above its expected range of $19 to $21 a share.
- Shares of American Airlines Group Inc. continued to surge Friday, and Raymond James analyst Savanthi Syth suggests enough is enough, as she turned bearish on the air carrier. “Taking into consideration the additional debt during the current crisis, we view AAL as priced close to perfection,” she wrote. Shares were up nearly 25%.
How are other assets trading?
Oil prices climbed Friday morning as OPEC+ set a tentative date for a meeting.
In precious metals, August gold on Comex slid 2.4% as the robust jobs report dented haven-related demand for the precious metal.
In global equities, the Stoxx Europe 600 index rose 2.2%, while the FTSE 100 index added 2%.
In Asia, Japan’s Nikkei rose 0.7%, the China CSI 300 finished 0.4% higher and Hong Kong’s Hang Seng Index rose 1.8%. South Korea’s Kospi index gained 1.4%.
The 10-year Treasury note yield added 11 basis points to 0.925%, according to Dow Jones Market Data. Bond prices move in the opposite direction of yields.
The greenback gained 0.1% against its major rivals, gauged by the ICE U.S. Dollar index.