Stocks rally on blowout jobs report – Yahoo Finance

Stocks surged following a report that the U.S. economy added far more jobs than expected in December.

The S&P 500 (^GSPC) rose 2.21%, or 54.05 points, as of 10:05 a.m. ET. The Dow (^DJI) climbed 2.19%, or 495.8 points and posted the best open in more than three weeks. The Nasdaq (^IXIC) advanced 2.44%, or 157.89 points.

The Bureau of Labor Statistics reported Friday morning that the U.S. economy added 312,000 jobs in December, far exceeding expectations of 184,000. Average hourly earnings also rose, increasing 0.4% over last month and 3.2% over last year. The unemployment rate ticked up to 3.9% in December from 3.7% in November, which was due to an increase in labor force participation.

The 10-year Treasury yield jumped 4.4 basis points and stock futures rebounded following the report, and the U.S. dollar index (DX-Y.NYB) edged higher on stronger wages.

Mark Hamrick, senior economic analyst, said the U.S. labor market was in a “hiring heat wave” in December.

“There’s a lot to choose from regarding positive developments amid all of the uncertainty, volatility and worries elsewhere in the economy and the broader environment,” he said of the report.

The positive surprise from the latest jobs report bucks a trend among other recent data coming out of other areas of the U.S. economy, many of which have missed expectations. Manufacturing surveys from the New York, Philadelphia, Richmond and Dallas Federal Reserve banks have each disappointed, and both the Institute of Supply Management and IHS Markit’s reports this week pointed to slower expansion in the U.S. manufacturing sector. The Conference Board’s latest reading on consumer confidence sagged to a six-month low, and the housing market has come under pressure from historically high mortgage rates.

On Friday, IHS Markit released its results for U.S. services purchasing managers’ index, which also pointed to softness in service sector business activity. The headline index fell to 54.4 in December from 54.7 in November, indicating expansion at a slower clip for the sector. The pace of new business growth retreated for the third consecutive month, and service providers posted the slowest increase in new orders since October 2017.

The Federal Reserve is back in focus following the blowout jobs report, with investors questioning whether the strength of the labor market will steer policymakers toward a more hawkish monetary policy path to try and stave off inflation. According to Bloomberg data, after the release of the jobs report, Fed funds futures showed that traders now see a lower probability for a rate cut by the end of 2019, with futures contracts showing 11 basis points of Fed cuts for all of 2019 from 16 basis points earlier in the morning. The Federal Reserve raised rates four times in 2018 but signaled fewer rate hikes for 2019 after the Federal Open Market Committee’s last meeting in December.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 28, 2018. REUTERS/Jeenah Moon

“From a jobs perspective, I can’t imagine a much better report. From the market’s perspective, this could be really tricky,” said Peter Tchir, head of macro strategy at Academy Securities. “A series of weak data has had the market convinced we get Powell the dove – but if he wants to play hardball with the Powell Put he may feel justified to remain more hawkish than the market would like.”

Stocks also got a boost Friday morning after China’s commerce ministry said that China and the U.S. will hold vice ministerial level trade talks in Beijing on January 7 and 8, lifting prospects for a resolution to the ongoing trade tensions between two global economic powerhouses.

Cracks in both the U.S. and Chinese economies have recently begun to show as a result of the trade war.

Earlier this week, new data pointed to slowing growth in major sectors of China’s economy, with the Caixin/Markit Manufacturing Purchasing Managers’ Index pointing to contraction in China’s manufacturing sector for the first time since May 2017. And on Wednesday, Apple (AAPL) – one of the largest public companies in the world and a bellwether of U.S. corporate health – slashed its revenue guidance for the fiscal first quarter of 2019, citing weakness of sales in China as the driving factor for the reduction.

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