Bulls cheer modest jobs bounce

Stocks futures soared in the pre-open session on Friday morning after the government's April employment report largely met expectations: Payrolls expanded 223,000 while the unemployment rate fell to 5.4 percent, the lowest level since May 2008.

About 15 minutes after the open, the Dow was up 250 points, or 1.4 percent, to 18,174. The S&P 500 rose 25 points, or 1.2 percent, to 2,113. And the Nasdaq added 59 points, or 1.2 percent, to 5,004.

March jobs data was revised to the downside from 126,000 to 85,000 (lowest since June 2012). But that's not really surprising with first quarter GDP growth coming in at a mere 0.2 percent on the drag from a strong dollar, a larger trade deficit, and the severe winter weather much of the country suffered at the beginning of the year.

What does this mean going forward?

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The initial market reaction suggests traders are focused on the March weakness and the specter that the unevenness in the data keeps the Federal Reserve from hiking interest rates in June. Indeed, the Fed funds futures market doesn't expect any move on rates until September at the earliest. The dollar weakened, yields dropped, precious metals were bid, and stocks soared to test Monday's highs.

It's also possible the bulls were focusing on a lack of wage gains -- something the Fed has said it's looking for before moving on rates -- with average hourly earnings rising just 0.1 percent vs. the 0.2 percent rise that was expected. Pre-revision data from March had earnings up 0.3 percent before being downward revision to 0.2 percent.

Paul Ashworth at Capital Economics summed up the report by saying the numbers were "better, but not great" in what was overall something of a mixed bag. A June rate hike appears to be off the table finally, in their mind, with focus turning to September as the most likely liftoff date depending on the flow of macroeconomic data over the summer.

  • Anthony Mirhaydari

    Anthony Mirhaydari is founder of the Edge , an investment advisory newsletter, and Edge Pro, options newsletter. Previously, he was a markets columnist for MSN Money; a senior research analyst with Markman Capital Insight, a money management firm; and an analyst with Moss Adams focusing on the financial services industry.