Stocks rise as data shows strong January jobs growth
By John Towfighi, CNN
New York (CNN) — US stock futures were higher Wednesday morning after new data showed the economy added 130,000 jobs in January, exceeding economists’ expectations.
Dow futures were up 265 points, or 0.53%. S&P 500 futures rose 0.62%. Nasdaq 100 futures gained 0.88%. The Dow and S&P 500 are less than 1% away from record highs.
The stronger-than-expected job gains come after Wall Street had been digesting recent data that had painted a picture of a US economy on shaky ground.
The US economy added 130,000 jobs in January, according to the Bureau of Labor Statistics, outpacing economists’ estimates for 75,000 jobs.
Shares had stumbled last week on news about job openings in December hitting their lowest level in five years as investors tried to assess the health of the economy and figure out whether to cash in on pricey stocks.
So with an official jobs report released Wednesday, delayed by several days because of the brief partial government shutdown, analysts say stocks could rise on confidence in a strong economy.
“January’s employment report was strong, which likely keeps the (Fed) on hold for now. The bigger implication may be for stocks,” Brad Conger, chief investment officer at Hirtle Callaghan, said in a note. “A stronger job market will support the ‘broadening trade’ – the rotational to industrial, cyclicals and consumer discretionary from technology.”
Treasury yields, which rise when bonds fall, jumped higher as investors adjusted to expectations for stronger growth. The US dollar index, which measures the dollar’s strength relative to six major currencies, rose 0.2%.
Not enough new jobs, or a loss in jobs, could have suggested an economy in trouble. The strong January job gains could reaffirm investors’ hopes that the US economy is remaining resilient.
Consumer spending in December was weaker than expected, according to Commerce Department data. And last month was the worst January for hiring announcements since 2009, according to data from career services company Challenger, Gray & Christmas.
That put extra weight on the monthly payrolls number. In addition to strong job gains, the jobless rate ticked down to 4.3% from 4.4%.
“Despite a run of decidedly weak economic data — including December retail sales and the latest JOLTS report — the monthly jobs report came in much stronger than expected,” Brent Kenwell, US investment analyst at eToro, said in a note.
The healthy jobs growth could boost views that the US economy has room to run this year. Still, the large number of job gains might make Federal Reserve policymakers back off any further interest-rate cuts this year.
“With labor-market concerns mounting, this is the kind of report investors should welcome — even if it gives the Fed more room to remain on hold,” Kenwell said.
“The (Fed’s) gaze instead will turn to the inflation picture with the economy continuing to perform above expectations,” Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management, said in a note.
John Canavan, lead analyst at Oxford Economics, said in an email that while a weak jobs report would have been a negative for stocks “by itself,” it would have been offset by increases in rate-cut expectations, “potentially underpinning the broader stock market as well.”
However, it is a fine line. A weak jobs report could have stoked nerves that the economy isn’t faring as well as investors thought, which could have negative implications for the stock market. Investors don’t want to inadvertently cheer on weakening job growth that could negatively impact consumer spending and economic growth, hurting stock prices.
Stocks are set to open higher Wednesday after the solid jobs report, suggesting Wall Street is digesting the data as good news for now.
“It would be refreshing for markets to embrace an environment where good news is good and bad news is bad,” Kenwell at eToro, said in a Monday note.
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