By Caitlin Ostroff
U.S. stocks jumped Thursday after the June employment report
showed the economy gained more jobs than expected last month.
The U.S. added 4.8 million jobs in June and the unemployment
rate improved to 11.1%, marking the second month in a row that
employers added jobs since massive waves of layoffs gripped the
country amid the coronavirus pandemic.
The Dow Jones Industrial Average added almost 450 points shortly
after the opening bell, rising 1.7%. The S&P 500, meanwhile,
jumped 1.5%, on track for its fourth day of gains. The tech-heavy
Nasdaq Composite also rallied, adding 1.4%.
Economists surveyed by The Wall Street Journal projected that
employers added 2.9 million jobs and the unemployment rate fell to
12.4% in June, following May's payroll gain of 2.5 million and
jobless rate of 13.3%. Before the coronavirus drove the U.S. into a
deep recession, the unemployment rate was hovering around a 50-year
low of 3.5%.
Though the unemployment rate remains historically high,
investors said Thursday that they are instead looking for signs of
progress.
"These numbers are quite large and represent basically the
opposite of the closing of the economy," said Jamie Cox, managing
partner for Harris Financial Group. "If we can get the unemployment
rate under 10% in the next read, then we'll be able to say this is
a full-on recovery."
Signs of the U.S. economy's revival have bolstered optimism
among some investors that the damage caused by the coronavirus
pandemic could be quickly erased. That, combined with speculation
that the Federal Reserve and the government will continue funneling
large amounts of money to American businesses and households, is
propelling stocks higher.
"In my mind, this is the beginning of a new bull market," said
Patrick Spencer, managing director of U.S. investment firm Baird.
"Aggressive fiscal and monetary stimulus is going to continue and
that's going to support the market, and recent economic data
suggests a recovery is starting to emerge."
However, the survey data were largely collected in mid-June and
won't reflect recent government-mandated business closures and
related layoffs over the past two weeks as some states in the South
and West reversed or paused reopening plans.
Weekly unemployment claims data, which offer a more up-to-date
view on the U.S. labor market, showed the number of new
applications for jobless benefits fell by 55,000 to 1.43 million
last week.
The number of applications for jobless benefits filed every week
has come down from a peak of nearly 7 million in late March, but
has stabilized near a historically high 1.5 million, an indication
that companies are continuing to cut jobs.
"Everybody is obviously watching the changes in the American
labor market," said Florian Hense, an economist at Berenberg Bank.
"The U.S. consumer is the most important driver of the global
economy."
While economic data may continue to signal recovery in the short
term, the revival is likely to slow, and even sputter, as
businesses navigate their way through new or remaining restrictions
on social and economic activity, investors said. American consumers
could also continue to avoid restaurants and entertainment venues
because of the infection risk or concerns about their paychecks
even after state and local authorities ease restrictions, which
would dampen the pace of the economic revival.
The surge in coronavirus cases in some states prompted Apple to
close 16 locations in Florida, Mississippi, Texas and Utah, with
plans to shut down 30 more locations by Thursday. McDonald's is
also pausing the reopening of dine-in service in the U.S.
"There are huge questions over whether the recovery will
continue at this pace over the coming months" on nonfarm payrolls,
said Andrew Hunter, senior U.S. economist at Capital Economics.
"Employment is pretty key for consumer spending."
Shares of cyclical stocks led Thursday's gains higher, with
companies including American Express and Coty rising. Both gained
more than 3% shortly after the opening bell.
Still, the gains across the market were broad-based, with all 11
sectors of the S&P 500 rising.
The pan-continental Stoxx Europe 600 gained 2%, while most major
Asian equity benchmarks ended the day higher.
Hong Kong's Hang Seng Index closed up 2.9%, while the Shanghai
Composite Index gained 2.1%.
In bond markets, the yield on the 10-year Treasury note rose to
0.699% from Wednesday's 0.682%. U.S. bond markets will close at 2
p.m. ET ahead of the Independence Day holiday.
-- Caitlin McCabe contributed to this article.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com
(END) Dow Jones Newswires
July 02, 2020 10:11 ET (14:11 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.