NEW YORK (AFP) – Wall Street stocks surged on Friday (June 5) following a surprisingly strong US jobs report, which markets viewed as validating recent gains and proving the economy is recovering.
The Dow Jones Industrial Average piled on nearly 830 points, or 3.2 per cent, to finish the week at 27,110.98.
The broad-based S&P 500 jumped 2.6 per cent to close at 3,193.93, while the tech-rich Nasdaq Composite Index climbed 2 per cent to 9,814.08, narrowly missing an all-time high.
The gains capped a banner week for the market, which has risen steadily from March when stocks plunged following a series of shocking moves to shutter much of the US economy.
Since March, investors have looked past huge increases in unemployment, weakening consumer confidence and other grim indicators in anticipation of better times against a backdrop of massive stimulus from Washington.
The Labor Department reported the US economy regained 2.5 million jobs in May and the unemployment rate dropped as coronavirus pandemic shutdowns began to ease.
The report defied even the most optimistic expectations among economists, who had been expecting a payroll decline of more than eight million and a jobless rate of 20 percent or higher.
“There was a sense things were getting better around the economy and stocks rallied sharply in April and May,” TD Ameritrade’s JJ Kinahan said in a note.
“Here in June, we just received a positive piece of news that might seem to justify at least some of the huge run-up since the March lows.
“The market isn’t always right, but it sometimes turns out to be a pretty good forecaster.”
But economists noted that unemployment of 13.3 per cent was still above the level at the peak of the 2008 financial crisis and there are still risks of additional layoffs in struggling industries.
The rally especially propelled cyclical companies seen as benefiting from a rebound, including Caterpillar, up 4.8 per cent, and airlines, as well as plane-maker Boeing, which surged 11.4 percent.
Another winner was Tiffany, which gained 6.5 per cent on revived confidence its US$16.2 billion acquisition by LVMH was still on track.
Banking sources told AFP that LVMH has not contacted Tiffany to renegotiate terms of the deal.