U.S. Stocks Rally As Traders Seem Unconcerned By Record Job Losses

After moving significantly higher early in the session, stocks saw some further upside over the course of the trading day on Friday. The major averages added to the gains posted in the previous session, with the tech-heavy Nasdaq reaching its best closing level in well over two months.

The major averages ended the session just off their best levels of the day. The Dow jumped 455.43 points or 1.9 percent to 24,331.32, the Nasdaq surged up by 141.66 points or 1.6 percent to 9,121.32 and the S&P 500 shot up by 48.61 points or 1.7 percent to 2,929.80.

For the week, the Nasdaq skyrocketed by 6 percent, the S&P 500 spiked by 3.5 percent and the Dow soared by 2.6 percent.

The rally on Wall Street came even though the Labor Department released a report showing a record nosedive in U.S. employment in the month of April.

The report said non-farm employment plummeted by 20.5 million jobs in April after tumbling by a revised 870,000 jobs in March.

The steep drop in employment was not as bad as feared, however, as economists had expected employment to plunge by 22.0 million jobs compared to the loss of 701,000 jobs originally reported for the previous month.

Traders seem to believe the dismal jobs picture was already priced into the markets during the sell-off seen in late February and March.

Many are now looking ahead to an anticipated economic rebound as states begin to reopen following their coronavirus-induced lockdowns.

The major averages have already climbed well off their March lows, with the tech-heavy Nasdaq turning positive for the year.

However, comments from several economists suggest the markets may be overly optimistic about the pace of the economic rebound.

Economists at Oxford Economics said they anticipate “the severe income loss, elevated precautionary savings and lingering virus fear will curtail consumer demand well past the lockdowns.”

“Social distancing, consumer angst, travel restrictions and the legacy of up to 40 million jobs lost mean there is zero prospect of a V-shaped recovery,” added ING Chief International Economist James Knightley.

Sector News

Energy stocks moved sharply higher over the course of the trading session, benefiting from a substantial increase by the price of crude oil. Crude for June delivery jumped $1.19 to $24.74 a barrel amid optimism about the outlook for demand.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index spiked by 7.3 percent, while the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index surged up by 4.7 percent and 4.5 percent, respectively.

Significant strength was also visible among tobacco stocks, as reflected by the 4.9 percent rally by the NYSE Arca Tobacco Index.

Steel stocks also saw considerable strength on the day, driving the NYSE Arca Steel Index up by 4.6 percent amid optimism about a rebound in demand.

Networking, computer hardware, housing and transportation stocks also moved notably higher, reflecting broad based buying interest on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan’s Nikkei 225 Index spiked by 2.6 percent, while China’s Shanghai Composite Index climbed by 0.8 percent.

The major European markets also showed strong moves to the upside on the day. While the French CAC 40 Index jumped by 1.1 percent, the German DAX Index and the U.K.’s FTSE 100 Index both surged up by 1.4 percent.

In the bond market, treasuries came under pressure in afternoon trading after showing a lack of direction earlier in the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.1 basis points to 0.682 percent.

Looking Ahead

Reports on consumer and producer price inflation, retail sales and initial jobless claims may attract attention next week, although traders could also look at the data as old news.

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