Stocks are rushing higher in morning trading today after a much-better-than-expected report on the U.S. job market gave Wall Street’s recent rally another shot of adrenaline.
The S&P 500 was up 2.2% after the government said that U.S. employers added 2.5 million workers to their payrolls last month. Economists were expecting them instead to slash another 8 million jobs amid the recession caused by the coronavirus and the shutdowns put in place to stem it.
While economists cautioned that it’s just one month of data and that many risks still loom on the long road to a full recovery, the report gives some credence to the optimism building among stock investors that the economy can climb out of its current hole relatively quickly. That hope has been a big reason for the better than 40% rally for the S&P 500 since late March.
The S&P 500 is now down only about 6% from its record set in February after being down nearly 34% earlier this year when recession worries were peaking.
“It looks like the healing process is underway in the jobs market and it looks like it’s happening sooner than expected,” said Todd Lowenstein, equity strategy executive of The Private Bank at Union Bank. “It looks like the worst is behind us.”
The Dow Jones Industrial Average was up 676 points, or 2.6%, at 26,958, as of 9:35 a.m. Central time, and the Nasdaq was up 1.7%.
In another show of increased confidence, the yield on the 10-year Treasury zoomed up to 0.92% from 0.82% late Thursday. This area of the market was much earlier than stocks to give warning about the coming economic devastation from the coronavirus outbreak. It had also been showing much more caution than stocks recently, but the 10-year yield is now close to its highest level since late March. The yield tends to move with investors’ expectations for the economy’s strength and inflation.
Stocks began their tremendous rally in late March after the Federal Reserve came to the rescue once again with promises of immense aid to keep markets running smoothly. Capitol Hill also agreed on unprecedented amounts of aid for the economy, which helped convince investors that the worst-case scenario of a full-blown financial crisis was off the table.
Analysts and economists warn, though, that a full recovery is still a long way away. The unemployment rate is still above 13.3%, which is nearly four times above where it was at the start of the year. The biggest threat is likely a possible second wave of coronavirus infections, which could derail all the improvement and push governments to tighten up on lockdown orders. Read the full story.
