Stocks Keep Coasting on Better-Than-Expected News on Jobs

Investors are betting the economic turnaround happened earlier than expected, as they await an updated policy statement from the Federal Reserve later this week.

Security personnel with dogs stand guard outside Saks Fifth Avenue in Manhattan last week as protests continued following the death of George Floyd, who died after being restrained by Minneapolis police officers on Memorial Day. (AP Photo/John Minchillo)

MANHATTAN (CN) — Still relishing Friday’s blockbuster jobs report, Wall Street continued its upward trajectory on Monday.

The Dow Jones Industrial Average gained 160 points at the opening bell Monday, a minor increase, while the S&P 500 also opened slightly higher. The Nasdaq began Monday at its highest point in history, at 9,823 points, six points higher than its previous high point in February.

Friday’s rally began after the Bureau of Labor Statistics reported that nonfarm jobs actually rose by 2.5 million last month. The unemployment rate fell to 13.3%, BLS said, a far cry from the 20% or higher that many experts — including Federal Reserve banks in Minneapolis and St. Louis, as well as the Congressional Budget Office — had predicted.

“I think we’re actually going to be back higher next year than ever before,” said President Trump at a press conference shortly after the report was released. Trump predicted the economy will rebound quickly as a V-shaped recovery instead of a prolonged U-shape or swoosh-shape. “We’ve been talking about the V. This is better than a V, this is a rocket ship. This is far better than a V,” he said.

Investors are awaiting the Federal Reserve’s Federal Open Markets Committee meeting on Wednesday, after which the central bank will give its thoughts on the economy and may decide to change interest rates. 

The FOMC, the central bank’s 12-member group that reviews economic conditions and sets monetary policy, has not met as a whole since March, before lockdowns began. The current target range on federal funds rate is between 0% and 0.25%. 

Some economists remain wary despite the jobs report and say a V-shaped recovery is not a fait accompli.

“What’s likely happening is that the initial impact is reversing in a big way even as the secondary and tertiary impacts are just getting started,” wrote Tim Duy, an economist at the University of Oregon in a blog post on Monday. “But it doesn’t mean a V-shaped recovery overall is in the making. How these opposing forces sort themselves out won’t become evident until later in the year, probably the fourth quarter.”

Duy noted that large shifts in the labor and equities markets will likely persist. “The economy is bouncing off the bottom, and a lot of big numbers are going to be bouncing around with it,” he wrote. “It’s going to be like watching the ball in a pinball machine as it jerks from one direction to another.”

Abroad, markets had less momentum. European markets seem poised for a mixed day at best, with most major exchanges flat and the pan-European Stoxx 600 down slightly by 8:30 a.m. EST.

In Asia, which had the weekend to digest the U.S. jobs report, gains continued albeit at a much slower pace, with Japan’s Nikkei leading the pack up 1.3% while other major markets were up slightly over 0%. 

Markets also have been propelled upward as states — including hard-hit New York and New Jersey — continue to reopen.

The number of cases of Covid-19 have continued to creep upwards. According to data compiled by Johns Hopkins University, the number of people infected worldwide with Covid-19 has grown to more than 7 million, while 403,000 have died. In the United States, 1.9 million are confirmed to have had Covid-19, while nearly 110,000 have died.

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