By Chris Matthews and William Watts, MarketWatch
Job growth beats estimates; unemployment rate rises as labor
force expands
U.S. stocks added to their gains Friday afternoon, more than
erasing Thursday's sharp losses after a better-than-expected jobs
report showed employers adding new personnel at a robust pace,
while average hourly earnings rose faster than expected.
Also bolstering sentiment were remarks by Federal Reserve Chair
Jerome Powell, who said that the central bank will be prepared to
quickly adjust interest rate policy if the global economic slowdown
investors have been fearing of late comes to pass.
What are major indexes doing?
The Dow Jones Industrial Average rose 784 points, or 3.5%, to
23,471, while the S&P 500 index advanced 86 points, or 3.6%, to
2,535. The Nasdaq Composite Index advanced 293 points, or 4.5%, to
6,756.
What's driving the market?
The U.S. economy added 312,000 new jobs in December
(http://www.marketwatch.com/story/us-gains-312000-jobs-in-final-month-of-2018-soaring-above-wall-street-forecast-2019-01-04),
well above expectations for a gain of 182,000, according to a
MarketWatch poll of economists. The strong headline number, along
with data showing wages grew faster than expected, helped dampen
fears that the Federal Reserve is being overly optimistic in its
plans to continue raising interest rates in 2019.
Investor optimism was further reinforced by comments by Federal
Reserve Chair Jerome Powell, who said during a Friday morning
appearance that the jobs report didn't materially increase concerns
over rising inflation, while reiterating that the central bank
would continue to keep an open mind about how much it will raise
interest rates in 2019 and how aggressively it will shrink its
balance sheet, based on incoming data about the U.S. and global
economy, including recent weakness in equity markets.
Read:Powell signals he's flexible on interest rates but not
resigning if Trump asks
(http://www.marketwatch.com/story/powell-signals-hes-flexible-on-interest-rates-but-not-resigning-if-trump-asks-2019-01-04)
The healthy report comes on the heels of a statement from
China's Commerce Ministry confirming that a delegation of U.S.
trade officials would meet with their Chinese counterparts Monday
and Tuesday, news reports said
(https://www.bloomberg.com/news/articles/2019-01-04/china-u-s-to-hold-vice-minister-level-trade-talks-jan-7-to-8),
marking the first time the two sides have met since President
Donald Trump and Chinese leader Xi Jinping agreed to a 90-day trade
truce last month.
Read:Stressed-out stock traders face Friday hurdles posed by
jobs report, Fed's Powell
(http://www.marketwatch.com/story/stressed-out-stock-traders-face-friday-hurdles-posed-by-jobs-report-feds-powell-2019-01-03)
Sentiment also got a boost after China's central bank on Friday
cut the ratio of cash that banks must hold as reserves
(http://www.marketwatch.com/story/china-cuts-banks-reserve-ratios-by-1-as-economy-slows-the-fifth-cut-over-past-year-2019-01-04)
by 100 basis points, or 1%, according to news reports -- a move
that's seen as a means to help reduce the risk of a sharper
slowdown in the world's second largest economy.
Also adding to optimism in China was a report showing that the
Chinese services sector grew
(http://www.marketwatch.com/story/chinas-service-sector-expanded-quicker-in-dec-2019-01-03)
at a faster rate in December versus November, while export orders
rose at the fastest pace in six months.
See:U.S. may find ray of light in December jobs report amid
gathering economic clouds
(http://www.marketwatch.com/story/us-may-find-ray-of-light-in-december-jobs-report-amid-gathering-economic-clouds-2019-01-03)
Stocks fell hard Thursday after Apple Inc. (AAPL) cut its
revenue guidance, in part citing weakness in China. A round of weak
manufacturing survey data out of China, the eurozone and the U.S.
added to the gloom. Apple shares fell sharply, posting their
biggest one-day percentage drop since 2013 while the overall market
drop left the S&P 500 and the Dow with the worst start to a
year
(http://www.marketwatch.com/story/the-stock-market-was-on-the-verge-of-the-worst-start-to-a-year-in-20-years-at-the-lows-2019-01-03)since
2000.
What are the analysts saying?
Stocks added to their gains in the immediate wake of Powell's
comments because "he reiterated that there isn't a set path for
future interest rate hikes," Steve Chiavarone, portfolio manager
with Federated Investments, told MarketWatch.
"It's not that the Fed is here to save the markets from
volatility,' he added. "But the magnitude of the pullback we've
had, around 20%, tells you something about what the market believes
about the underlying economy. It would be the height of hubris for
Powell to disregard that," and markets are taking solace in
Powell's suggestion that monitoring large swings in equity
valuations are important part of data dependence, Chiavarone
said.
With job growth and wage growth continuing to beat investor
expectations, "it makes it very difficult to argue that the Fed
should come to a complete halt in hiking interest rates, or that
the economy is meaningfully weakening," Willie Delwiche, investment
strategist with R.W. Baird, told MarketWatch.
While the market has lately reacted negatively to any news that
might encourage further rate hikes, Delwiche said, "if the Fed is
positioned to continue to raise rates in 2019 because the data
warrants it, it's not such a scary thing for the stock market."
Which stocks are in focus?
Apple shares are on the rebound Friday, rising 4%, following
Thursday's 9.9% decline.
How did markets trade yesterday?
On Thursday, the Dow tumbled 660.02 points, or 2.8%, to end at
22,686.22, while the S&P 500 dropped 62.14 points, or 2.5%, to
2,447.89. The Nasdaq shed 202.43 points, or 3%, to end at
6,463.50.
How are other markets trading?
Stock markets in China rallied Friday, after news of the
resumption of U.S.-China trade talks, new stimulus measures from
China's central bank, as well as a better-than-expected report on
the Chinese services sector.
Both the Shanghai Composite Index and Hong Kong's Hang Seng
Index gained more than 2%. Japan's Nikkei , however, slid 2.3%
after the Tokyo Stock Exchange had been closed for holidays all
week.
European stock markets are rallying, with the Stoxx Europe 600
and the FTSE 100 closing solidly in the green.
Crude oil futures are rising Friday, up 2.`%, while the U.S.
dollar edged lower and gold prices fell by 0.6%.
(END) Dow Jones Newswires
January 04, 2019 13:36 ET (18:36 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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