Positive Reaction To Jobs Data Leads To Strength On Wall Street

Stocks showed a strong move to the upside during trading on Friday as traders reacted to the Labor Department’s closely watched monthly jobs report. With the upward move, the major averages ended the session at their best closing levels in a month.

The major averages all closed firmly in positive territory, although the tech-heavy Nasdaq outperformed its counterparts. While the Nasdaq jumped 199.98 points or 1.5 percent to 13,814.49, the S&P 500 advanced 37.04 points or 0.9 percent to 4,229.89 and the Dow rose 179.35 points or 0.5 percent to 34,756.39.

For the holiday-shortened week, the Nasdaq climbed by 0.5 percent, the S&P 500 increased by 0.6 percent and the Dow advanced by 0.7 percent.

The strength on Wall Street came after the Labor Department report showed job growth in the U.S. reaccelerated in May but still fell short of economist estimates.

Non-farm payroll employment jumped by 559,000 jobs in May after climbing by an upwardly revised 278,000 jobs in April.

Economists had expected employment to surge by 650,000 jobs compared to the addition of 266,000 jobs originally reported for the previous month.

Employment in the leisure and hospitality sector showed another significant increase, spiking by 292,000 jobs during the month. Notable job growth was also seen in public and private education and health care and social assistance.

The Labor Department also said the unemployment rate fell to 5.8 percent in May from 6.1 percent in April, while economists had expected the unemployment rate to dip to 5.9 percent.

With the bigger than expected decrease, the unemployment rate dropped to its lowest level since hitting 4.4 percent in March of 2020.

Traders seemed to view the weaker than expected job growth as a “Goldilocks” situation, where the economy is expanding but not fast enough to encourage the Federal Reserve to tighten monetary policy.

Paul Ashworth, Chief U.S. Economist at Capital Economics, noted employment remains 7.6 million below its pre-pandemic peak and said it would take more than 12 months at the current pace to fully eradicate the shortfall.

“In any other set of circumstances, monthly gains in excess of half a million would be amazing but, with a 7.6 million shortfall, it will be some time at that pace before the Fed’s ‘substantial further progress’ has been met,” Ashworth said.

The Fed has said it won’t begin tapering its asset purchases until “substantial further progress” has been made toward its goals of maximum employment and price stability.

Sector News

Semiconductor stocks turned in some of the market’s best performances on the day, resulting in a 2.4 percent jump by the Philadelphia Semiconductor Index.

Chipmaker Broadcom (AVGO) posted a notable gain after reporting better than expected fiscal second quarter results and providing upbeat guidance.

Significant strength was also visible among software stocks, with the Dow Jones U.S. Software Index surging up by 2 percent.

Networking stocks also saw considerable strength on the day, driving the NYSE Arca Networking Index up by 1.7 percent to a new record closing high.

Outside of the tech sector, gold stocks moved notably higher amid a rebound by the price of the precious metal. With gold for August delivery jumping $18.70 to $1,892 an ounce, the NYSE Arca Gold Bugs Index rose by 1.3 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in yet another mixed performance during trading on Friday. Japan’s Nikkei 225 Index slid by 0.4 percent, while China’s Shanghai Composite Index inched up by 0.2 percent.

Meanwhile, the major European markets all showed modest moves to the upside on the day. While the German DAX Index rose by 0.4 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index both crept up by 0.1 percent.

In the bond market, treasuries moved notably higher in reaction to the monthly jobs data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 6.5 basis points at 1.560 percent.

Looking Ahead

Next week’s trading may be impacted by reaction to the Labor Department’s report on consumer prices in the month of May, as concerns about inflation continue to weigh on investors’ minds.

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