Dow Booms as Wall Street Defies Ray Dalio’s Free Market Death-Knell

• The Dow Jones rallied in response to a “record” jobs report.
• With lockdowns returning, is Wall Street glancing foolishly in the rearview mirror?
• Ray Dalio has a different theory. He says the free market’s dead.

A better than expected jobs report helped send the Dow Jones pumping higher on Thursday.

While Wall Street rejoiced to see shrinking unemployment numbers, some economists fear that the latest data is already out of date.

If they’re correct, that’s bad news for the bulls. Or it might, as Ray Dalio argues, expose an uncomfortable truth about U.S. financial markets.

Dow Closes the Week on a Major High

All three major U.S. stock market indices enjoyed a healthy end to the week. Here’s where they stood at 3:22 pm ET:

• The Dow had gained 218.92 points or 0.85% to trade at 25,953.89.
• The S&P 500 was up 0.95% at 3,145.4.
• The Nasdaq had rallied 1.03% to 10,259.13.

Stock market bulls cheered the strong non-farm payrolls report, especially the sharp drop in the unemployment rate.

Lurking in the background, the weekly initial jobless claims figure came in worse than anticipated. That’s ominous for the labor market.

The jobs report predates a second wave of lockdowns across the United States. Large portions of the job gains could be reversed.

The timing could worsen those employment losses. California is one of several states tightening economic restrictions  ahead of the July 4th weekend. Employees who had been rehired in time for the holiday  could find themselves laid off in short order.

Ray Dalio Warns of the Death of the Free Market

ING economist James Knightley had warned that the June jobs report could paint an inaccurate picture of the U.S. economy. He elaborated on that argument in commentary this morning.

Knightley sees huge headwinds for the U.S. economy moving forward, as demonstrated by the jobless claims data.

Another big upside surprise for payrolls of 4.8mn while the unemployment rate plunges to 11.1%. Great news, but it doesn’t tell the whole story. 31.5mn people are claiming unemployment benefits and employment is still 15 million lower than February. Moreover, with states dialling back on re-openings the July jobs report could be far more sobering.

With states like Arizona, Florida, and Texas all finally bearing the brunt of the pandemic , it’s surprising to see the Dow so buoyant.

Bridgewater’s Ray Dalio suggests this is evidence that the “free market” is dead and that central banks control capital markets. He outlines this argument in the Bloomberg interview below:

Dow 30 Stocks: Apple Climbs as Store Closures Mount

On a positive day for the Dow 30 , Apple – the index’s crown jewel – was back on the rise. AAPL’s 0.7% rally came despite the headline that CEO Tim Cook was shutting down stores in 11 states .

Reversing the reopenings didn’t spook Apple bulls, as the tech giant continued its steady grind towards a $2 trillion market cap.

Even the oft-weak Boeing stock clawed to a 0.6% gain.

Only three members of the Dow Jones were slightly in the red. Disney, Walmart, and McDonald’s failed to make any ground.

Given that these stocks (perhaps excluding Disney) are defensive investments, it’s not surprising to see them struggling while speculative tech stocks launch the Nasdaq to record highs.