Stocks rallied on Friday after a historic and surprising gain in U.S. jobs raised hope the economy is starting to recover from the coronavirus pandemic.
The Dow Jones Industrial Average jumped more than 700 points, or 2.7%. The S&P 500 traded 2.2% higher. The Nasdaq Composite advanced 1.7%. The Nasdaq-100, which tracks the 100-largest nonfinancial companies in the composite, rose 1.4% to a record high.
Friday’s rally put the S&P 500 down just 1.6% for 2020. At one point this year, the broader market index was down 30.3%. The Dow was only down 5.4% year to date after being down as much as 34.6% in 2020. The Nasdaq Composite is now up more than 8.7% this year.
“We’re back,” CNBC’s Jim Cramer said on “Squawk Box.” “I think there were a lot of people who felt that the layoffs would be permanent and it’s obvious that there’s so much demand that people have to bring people back.”
Wall Street was already on pace for solid weekly gains. Entering Friday’s session, the Dow was up 3.5% week to date. The S&P 500 had gained 2.2% and the Nasdaq Composite was up 1.3%.
U.S. employers added a shocking 2.5 million jobs last month — the largest gain on record — while the unemployment rate slid to 13.3%, the Labor Department said Friday. Economists polled by Dow Jones expected a drop of more than 8 million jobs and the unemployment rate to nearly reach 20%, which would have been the highest since the 1930s.
“The unemployment rate was solid; the participation rate was higher. This checks all the boxes for a solid report,” said Drew Matus, chief market strategist at MetLife Investment Management. “So even though this was coming off a horrendous report the previous month, there’s nothing that screams this is some sort of error that can be ignored. If anything, it suggests we should be looking for more good news next month.
President Donald Trump touted the strong data in a series of tweets, saying: “It’s a stupendous number. It’s joyous, let’s call it like it is.”
Trump also said he would hold a news conference at 10 a.m. to discuss the jobs data.
The report boosted confidence of a swift economic recovery among traders, leading them into stocks that would benefit the most a broad reopening.
Shares of airlines jumped, adding to their big gains this week, as the industry added more summer flights. American Airlines jumped 28.6%. United Airlines shares surged 21.3%. The US Global Jets ETF is up 44.6% this week. Cruise-line operators such as Norwegian Cruise Line and Carnival both advanced more than 17% while Royal Caribbean gained 13.2%.
MGM Resorts jumped 8.2% while Kohl’s and Nordstrom advanced more than 12% each. Mall operator Simon Property gained 14.1%.
Shares of banks, which have been decimated during the pandemic as lending activity and margins dried up, soared as the jobs report suggested a quick bounce back for the economy. JPMorgan Chase, Citigroup, Wells Fargo and Bank of America all rose at least 5%.
Those gains came largely at the expense of stocks that benefited from people staying at home in the early stages of the coronavrius pandemic. Netflix fell 0.8% and Zoom Video lost 3.5%. Amazon slid 0.2%.
“The economy and the stock market have generally moved in the same direction over time, though rarely in lock-step,” said Willie Delwiche, investment strategist at Baird, in a note. “The gulf between current headlines for Wall Street (best 50-day rally ever for the S&P 500) and Main Street (one-in-four American workers have now filed for jobless benefits) seems more extraordinary than normal.”
“While not looking past the current pain, the hope is that from these moments of uncertainty, a path toward a more hopeful future (and more robust economic participation) will emerge,” said Delwiche.
Friday’s gains put the S&P 500 up more than 45% from a March 23 intraday low and less than 6.5% from its Feb. 19 record. The Nasdaq Composite has rallied over 47% in that time and is less than 1% from its all-time high.
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Stocks rallied after a historic and surprising gain in U.S. jobs raised hope the economy is starting to recover from the coronavirus pandemic.