The Dow Jones enjoyed a monster rally on Friday as the stars aligned in the jobs data and Dow bulls bet on a last-minute tariff breakthrough.
A 335-point surge in the Dow Jones helped the index rocket back closer toward record highs on Friday.
The stock market rally was powered by jobs data, consumer sentiment, and optimism around the state of trade talks between the US and China. Donald Trump and Xi Jinping both have a vested interest in making a deal, as China’s tariff reduction gift on US soybeans shows.
Despite the optimism, analysts at Nordea believe the jobs data could have peaked. They warn that underlying indicators hint at upcoming weakness.
All three of the major US stock market indices gained around 1% to close the week, as Friday’s jobs report sent the Dow Jones, S&P 500, and Nasdaq climbing back toward record highs.
The Dow Jones Industrial Average jumped 335 points or 1.12% to 28,012.79.
The S&P 500 rose 29.74 points or 0.95% to 3,147.17.
The Nasdaq split the difference, gaining 89.1 points or 1.04% to reach 8,659.80.
Unsurprisingly given the rally in the stock market, the price of gold was under severe pressure, losing more than 1.2% as investors piled into risk assets. Crude oil rallied around 1.3% after OPEC committed to support prices with sustained cuts.
Interestingly, the safe-haven Japanese yen mounted a substantial comeback midday, suggesting not everyone in the marketplace trusts this rally.
A big jump in non-farm payrolls headlined what appears to be an impressive jobs report that also featured a decline in the unemployment rate and a rise in earnings.
While the participation rate did decline, there is no question that payrolls are a good sign that job creation is alive and well. Michigan consumer sentiment also exceeded market expectations.
Dow bulls appeared to jump on the impressive data, but some of the rally may also have been driven by a goodwill gesture from China, which removed tariffs on some US agricultural imports. The question now remains if the optimism pushed by the White House results in the cancellation of December’s planned levies. Elevated stock markets are now looking even more exposed to any possible disappointment after today’s rally.
Despite what appears to be a blockbuster jobs report for the US, analysts at Nordea believe that things might not be looking quite as rosy as they appear.
Today’s “Macro Flash” report focuses on several long term indicators, suggesting that the recent GM strike has distorted the figure and that hard data is only going to worsen.
Nonfarm payrolls increased by 266k in November, clearly overperforming consensus. The figure was, however, somewhat artificially lifted due to end of the GM strike. We expect the job market to soften going forward… Several of the best leading indicators on the volatile payroll numbers – including overtime hours worked and NFIB job openings – indicate a weaker trend from here.
The Dow 30 ripped higher, with only United Healthcare (-0.38%) meaningfully lower on the day. For the index’s heavy hitters, it was a huge day, as Apple and Boeing powered ahead with gains of roughly 2%.
Although Apple was likely rising on the tide of increasing market optimism, there is no question that there is a good deal of excitement about the prospect of a fully wireless iPhone hitting shelves as soon as 2021.
Headlining the Dow Jones was financial giant Goldman Sachs, which spiked 3.55% on headlines that the settlement for the company’s involvement in the 1MDB scandal might only be $2 billion. Although this is still a substantial amount, markets had been fearful that the penalty could be considerably higher.
This article was edited by Josiah Wilmoth.
Last modified: January 22, 2020 11:41 PM UTC