Wall Street Jumps on December Jobs Report Optimism

Wall Street jumped after a blockbuster December jobs report as relief washed over global equity markets thanks to a positive close to the week in China.

As of 9:30 a.m. ET, the Dow Jones Industrial Average was up 111 points, or 0.65% to 16618. The S&P 500 gained 12 points, or 0.65% to 1955, while the Nasdaq Composite added 42 points, or 0.92% to 4733.

All 10 S&P 500 sectors were in the green as consumer staples and financials led the way higher.

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Call it a December to remember: Wall Street cheered a much better-than-expected jobs report, which showed the U.S. economy added 292,000 in the final month of 2015, compared to expectations for a gain of 200,000 jobs. The unemployment rate held steady at 5% while the labor force participation rate ticked up to 62.6% from 62.5%.

Eric Wiegand, senior portfolio manager at U.S. Bank’s Private Client Reserve, said there was only one way to describe the report: “Wow.”

“it had something for everybody. The headline numbers and the revisions for the payrolls were quite remarkable. It’s certainly going to give investors reason for comfort, perhaps not renewed confidence, that the U.S. is a bit of a different story despite the last few days of action out of China.”

The only surprising piece out of the report, he said, was a lack of wage pressures. Average hourly earnings for all private workers were unchanged during December. He also commented on the surprise increase in factory jobs in the U.S., which he said was interesting, but not yet conclusive since it’s only one data point. Jobs in the sector saw a gain of 8,000, compared to expectations for a loss of 1,000 jobs for the month. Those numbers come during a time when the U.S. manufacturing sector remains rooted in contraction territory.

The bottom line: The data was just what the doctor ordered for the broader markets that had, before the start of trade Friday, shed more than 5% for the week.

“I think this is a calm port in a storm,” Wiegand said. “It doesn’t address concerns that spilled over from 2015, and those are the trajectory of global growth and the impact on currencies and central bank policies around the world. But it’s reassuring, and we still believe the U.S. is in a good position, though our conclusion is that we are likely to be in a period of increased volatility.”

On the heels of the jobs report, futures added to initial gains of more than 100 points on the Dow, which came from confidence out of China where the Shanghai Composite index, which twice experienced a trading halt thanks to heightened volatility this week, rallied overnight. The index finished up 2%, but sustained losses of more than 10% for the week.

Optimism came after the People’s Bank of China set the yuan unchanged from the previous session and after regulators opted to suspend the market’s so-called circuit breaker, a mechanism that halts trading when equities fall 7% in a single session. The tool’s goal was to prevent panic selling, but traders and analysts have said it actually did the opposite in China since the threshold was set low compared the U.S.’s 20% circuit breaker.

“Human psychology has had a strong hand to play in the way Chinese markets behaved. The removal of the system that suspends the market should it fall too much has, ironically, seen the fear of entrapment reduced with Asian investors, IG market analyst Alastair McCaig said in a note.

He added the change in tactic from regulators should help the second week of the trading year get off to a more normal start.

Peter Kenny, independent market strategist, agreed, saying the momentum of the “inaugural 2016 selloff” may have reached its fever pitch on Thursday.

“Normally Fridays are not the day of the week where buyers show up in force, but given the extreme risk-off nature of our first four days of trading this year, bargain hunters may be enticed to step into the market,” he said.

Elsewhere in the market, global oil prices staged a rally Friday as markets calmed in China, though the global glut of crude supplies limited gains.

In recent action, West Texas Intermediate crude prices gained 0.21% to $33.30 a barrel, while Brent, the international benchmark, gained 0.18% to $33.81 a barrel.

Investors also kept a close eye on the potential for Saudi Arabia to take its state-owned company, Aramco, public. The country said it was studying its options.

“Even if current speculation that Saudi stat-owned oil company Aramco doesn’t come to market, it highlights how serious the pain from reduced revenues must be that they are even considering it,” McCaig said.

Elsewhere in commodities, metals were mixed as gold, which saw a rally in the prior session as traders sought safe havens, fell 0.36% to $1,104 a troy ounce. Silver slipped 1.91% to $14.07 an ounce, while copper gained 0.20% to $2.03 a pound on China optimism.

 

@foxbusiness.com – Wall Street Jumps on December Jobs Report Optimism