Stocks skyrocketed, the dollar weakened and Treasuries tumbled with gold as a risk-on tone gripped financial markets after investors got good news on the economy, Federal Reserve policy and trade tensions.
The Standard & Poor's 500 index rallied 3.4 percent, the Dow Jones industrial average roared higher by almost 750 points and the NASDAQ composite surged 4 percent. All but one of the blue-chip index’s 30 members advanced. The rally didn’t surpass the post-Christmas breakout, but it ranked among the steepest of the bull market.
Stocks opened sharply higher after data showed a unexpectedly large spike in hiring last month that was accompanied by faster wage growth and an increase in participation, abruptly tamping down concern that a recession was growing likely.
Stocks surged to session highs after Jerome Powell said Fed policy is flexible and officials are “listening carefully” to the financial markets. Futures had advanced overnight on news the U.S. and China will hold trade talks next week.
The convergence of good news for equity markets emboldened fixed-income bears, who had been hammered in recent weeks as investors sought havens. The 10-year Treasury yield spiked above 2.65 percent, halting a rout that took it down 25 basis points in the prior week. Gold pulled back sharply after briefly topping $1,300 an ounce overnight. The yen weakened. The biggest leveraged loan exchange-traded fund, Invesco Senior Loan ETF, jumped.
Powell’s remarks soothed investors who’d grown concerned the Fed was determined to raise rates even as signs of slowing growth emerging. Stocks got hammered Thursday after a factory reading fell the most in a decade and Apple warned its sales would miss targets. Jitters over the economy calmed further Friday by services sector data that topped estimates.
Trade remains in focus, with mid-level officials from the U.S traveling to China for talks next week just as tariff effects have started to show up in corporate profit warnings. China moved to secure liquidity for its slowing economy, and political drama in Washington persists, with the shutdown showing no signs of resolution.
“The strong December jobs report is a net positive for stocks because investors’ biggest concern has been slowing growth,” said Alec Young, managing director of global markets research at FTSE Russell. “December’s strong job gains help ease that concern. It’s hard to square recession worries with the strongest job growth we’ve seen in years.”
Even with Friday’s surge, the gains did little to dent the rout that’s hit global equities in the past month, with major averages off well over 10 percent from previous highs. Treasury yields that topped 3.2 percent in November now sit 60 basis points lower as investors reassess the prospects for growth in 2019. Gold has surged to multi-month highs and crude has plunged, adding to angst that demand is flagging.