U.S. Stocks Close Sharply Higher on Powell Remarks, Jobs Report

01/04/19 04:23 PM EST
By Corrie Driebusch and David Hodari 

U.S. stocks bounced back from their worst two-day start to a year since 2000, soaring Friday after fresh signs of economic strength eased fears that slowing growth around the world could drag on the U.S. expansion.

The Dow Jones Industrial Average jumped more than 700 points Friday as better-than-expected hiring in December suggested a healthy labor market. Stocks rose further after Federal Reserve Chairman Jerome Powell said economic data suggests good momentum heading into the new year, but that the central bank is "prepared to adjust policy quickly and flexibly" if necessary.

The combination mitigated worries about a sharp economic slowdown. These fears sent waves of volatility sweeping through stock and bond markets in recent weeks and drove the Dow industrials and S&P 500 to their worst December since 1931.

On Friday, the blue-chip index rose nearly 750 points, or 3.3%. The S&P 500 and the Nasdaq Composite gained 3.4% and 4.3%, respectively. Major indexes were led higher by tech companies and stocks most-heavily exposed to the Chinese economy, such as Caterpillar, after China confirmed a two-day meeting with U.S. representatives to work to resolve the countries' trade dispute.

Investors said it is unclear whether Friday's gains mark an end to the recent choppiness or if they are fleeting. The S&P 500 is on track to log its second gain of at least 3% in the last seven trading sessions, a rare occurrence that tends to only happen during stressed markets, according to analysis by Frank Cappelleri, executive director at Instinet LLC. In the past decade, such a cluster of big gains occurred in August 2011, March 2009 and in the fall of 2008, his data shows.

Friday morning, futures climbed, suggesting stocks were already poised for a bounceback. Then the surprise: U.S. nonfarm payrolls increased a seasonally adjusted 312,000 in December, the Labor Department said Friday, the biggest jump since February. Average hourly earnings also rose, notching their best full-year gain since 2008.

"These numbers are not consistent with a recession in 2019," said Darrell Cronk, chief investment officer for wealth and investment management at Wells Fargo & Co. He added that while he expects global growth and U.S. economic growth to slow this year, he believes many investors have become too pessimistic.

Investors parse jobs reports for clues on the health of the U.S. economy and for their significance to Fed policy, which has given many cause for concern in recent months. Economists polled by The Wall Street Journal had forecast the addition of 176,000 jobs to the U.S. economy in December.

The yield on 10-year U.S. Treasurys climbed to 2.661%, according to Tradeweb, from 2.557% late Thursday. The yield on the two-year note, which typically moves with investors' expectations for central bank policy, rose to 2.488% from 2.391%. Yields rise as bond prices fall.

Later Friday morning, traders and investors tuned in to a conference in Atlanta where Mr. Powell, and fellow former Fed leaders Ben Bernanke and Janet Yellen, spoke. Investors took note of the discussion in part due to its timing, hours after a fresh jobs report and following developments this week that stoked fears about slowing economic growth.

Traders in Stifel Nicolaus' Baltimore office plugged in their headphones Friday morning to listen to Chairman Powell's commentary for clues about the path of Fed policy. In the weeks leading up to corporate results, remarks from the Fed and economic data are what traders and investors say they are focusing on most.

Mr. Powell appears to be "more open to listening to what the market is telling him rather than just what the data is telling him," said Justin Wiggs, Stifel's managing director in equity trading. That is a good thing for stock investors, he added.

Stocks around the globe also rose Friday, while haven assets reversed their moves from earlier in the week. The Shanghai Composite Index, the Shenzhen A-Share and the Hang Seng all rose more than 2%. China-exposed equities outperformed in Europe. The broader Stoxx Europe 600 index climbed 2.8%, also buoyed by its energy constituents, which rose partly on the continuing resurgence in energy prices.

Write to Corrie Driebusch at corrie.driebusch@wsj.com and David Hodari at David.Hodari@dowjones.com


(END) Dow Jones Newswires

January 04, 2019 16:23 ET (21:23 GMT)

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