By Chris Matthews and William Watts, MarketWatch
Job growth beat estimates; unemployment rate rose as labor force
expands
U.S. stocks staged a major rally to close out the week, more
than erasing Thursday's sharp losses after a better-than-expected
jobs report showed employers adding new personnel at a robust
pace.
Also bolstering sentiment were remarks by Federal Reserve Chair
Jerome Powell.
What are major indexes doing?
The Dow Jones Industrial Average rose 746.94 points, or 3.3%, to
23,433.16, while the S&P 500 index advanced 84.05 points, or
3.4%, to 2,531.94. The Nasdaq Composite Index advanced 275.35
points, or 4.3%, to 6,738.86.
At session highs, the Dow rose as much as 832.42 points, the
S&P 500 90.16 points, while the Nasdaq surged 297.18
points.
Friday's performance saved markets from what had been the worst
start to a year for the Dow and S&P 500 since 2000, according
to Dow Jones Market Data.
After Friday's close, the Dow is up 0.5% on the year, the
S&P 500 1%, while the Nasdaq has advanced 1.6% over the first
three trading days of 2019.
What's drove 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 Fed
Chairman 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 is 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 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 were in focus?
Apple Inc. (AAPL) shares rebounded, rising 3.9%, following
Thursday's 9.9% decline spurred by the company cutting its revenue
guidance, citing weaker iPhone sales in China.
Shares of Netflix Inc. (NFLX) closed up 9.1%, after Goldman
Sachs added the stock
(http://www.marketwatch.com/story/netflix-shares-rally-after-upbeat-goldman-says-stocks-a-buy-following-pullback-2019-01-04)
to its conviction list and said a 36% pullback since July presents
an attractive buying opportunity.
Coty Inc. (COTY) shares are up 4.7%, after JPMorgan analyst
Andrea Teixeira raised her rating
(http://www.marketwatch.com/story/coty-upgraded-as-stock-valuation-hit-rock-bottom-last-year-2019-01-04)
on the stock from sell to neutral, arguing that the beauty-products
company's stock has hit a "rock bottom" valuation. The stock is
down more than 49% over the past six months.
How did 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 also rallied, with the Stoxx Europe 600
and the FTSE 100 closing solidly in the green.
Crude-oil futures are rising Friday, up 2.3%, while the U.S.
dollar edged 0.1% lower and gold prices fell by 0.6%.
(END) Dow Jones Newswires
January 04, 2019 16:21 ET (21:21 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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