Stock market jumps on surprisingly strong jobs report
Stocks surged Friday after a government report showed that employers added 2.5 million jobs in May and the jobless rate edged down. The surprisingly strong employment figures is fueling optimism among investors that the economy is beginning to rebound after the coronavirus pandemic brought it to a standstill.
The Dow jumped more than 800 points, or nearly 3.22%, to 27,110. The broad-based S&P 500-stock index rose 2.6% while the tech-heavy Nasdaq composite gained 1.4% to 9,814, just a few points shy of a record high.
The Labor Department's May jobs report suggests the economy hit its low point in April, after states ordered non-essential businesses to close, according to Fitch Ratings chief economist Brian Coulton. Businesses are now beginning to reopen as states ease their "stay-at-home" orders, which is generating optimism on Wall Street that the economy will regain its footing sooner than many experts had feared.
Ahead of the government's labor readout, many economists and Wall Street analysts had predicted that the economy would continue to hemorrhage jobs and that the unemployment rate would approach 20%.
"The biggest payroll surprise in history, by a gigantic margin, likely is due to a wave of hidden rehiring," Pantheon Economics chief economist Ian Shepherdson told investors in a research note on Friday. "Businesses which let people go in large numbers in March didn't need to post their intention to bring people back on. Indeed — they just needed to call/text/email."
The job gains last month also come amid a remarkable comeback for stocks during the past several weeks. Stocks had gained almost 40% through Thursday after touching a four-year low in mid-March on economic worries. That surge represents the largest 50-day rally since 1957, according to LPL Financial senior market strategist Ryan Detrick.
Despite the ongoing hit from the pandemic, investors have been focused on their expectations for an economic recovery that could take root as U.S. states reopen their economies. Bolstering that optimism is the trillions of dollars the Federal Reserve has pumped into the economy in hopes of avoiding an economic crash.
"The May report provides a sense of optimism that most workers will be recalled in coming months," said BMO Capital Markets senior economist Sal Guatieri in a report. "It's their spending that will help drive new business formation that will then provide jobs to workers facing longer-term layoffs... though this road will likely still be a long one to travel."
