“The good news is actually good news”, says Jeff Carbone, managing partner at Cornerstone Financial Partners, reflecting a view that the report was firm enough to signal that the US economy was stable but not strong enough to heighten concerns about higher USA interest rates. The three-month average gain now stands at 190,000 after a dismal May that saw an upwardly revised 24,000 increase.
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Banks rose the most, as higher interest rates boost their profits on lending. German benchmark DAX index at Frankfurt Stock Exchange jumped 1.36 percent, while British benchmark FTSE 100 Index added 0.79 percent.
Consumer companies also made big gains. Investors sold bonds, precious metals, and phone and utility companies, safe investments that soared earlier this year as investors anxious about the health of the economy.
“It looks like corporate earnings are on the upswing”, said Sam Stovall, U.S. equity strategist for S&P Capital IQ. The report was expected to ease investor concerns raised by weaker reports earlier in the year.
Last month’s strong jobs growth should reinforce the Fed’s confidence in a labor market that officials view as at or near full employment.
The Dow Jones industrial average rose 191.21 points, or 1.04 per cent, to 18,543.26, the S&P 500 gained 18.57 points, or 0.86 per cent, to 2,182.82 and the Nasdaq Composite added 54.87 points, or 1.06 per cent, to 5,221.12.
Both the S&P 500 and the Nasdaq scored new record high closes on Friday. USA consumer spending in June rose for the third month in a row, reported the Bureau of Economic Analysis, capping off the strongest quarter since the financial crisis. The unemployment rate remained at 4.9 percent and hourly pay continued to rise.
Traders had pushed out their expectations on the timing for higher borrowing costs following a weaker-than-forecast reading last week on United States growth and yesterday’s Bank of England interest-rate cut.
For the week, the Dow rose 0.6 percent, the S&P 500 gained 0.4 percent and the Nasdaq advanced 1.1 percent.
Kate Warne, an investment strategist for Edward Jones, said the report reassured investors but won’t vanquish their fears entirely.
The data suggests that the April and May jobs data was an aberration and that June was more consistent with what is going on in the economy, he said.
EYES ON THE FED: The Federal Reserve has been saying for months that it intends to raise interest rates if the economy’s strength warrants it. July’s report provides more evidence the economy is doing well, boosting the chances of a rate.
With financial stocks leading the charge, Pavlik said the jobs number may push the Fed closer to a September rate increase, but he has some misgivings.
Bond prices fell and the yield on the 10-year U.S. Treasury note jumped to 1.59 percent from 1.50 percent. Its stock picked up $3.56, or 4.2 percent, to $89.10.
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Merck & Co. Inc.(MRK) surged more than 10% after Bristol-Myers Squibb Co.’s (BMY) late-stage trial of a cancer treatment failed (http://www.marketwatch.com/story/bristol-myers-lung-cancer-drug-did-not-meet-primary-endpoint-in-late-stage-trial-2016-08-05) to meet its primary endpoint. Meanwhile rival drugmaker Merck soared by the most in seven years. AstraZeneca, which is also studying a lung cancer drug regimen, added 37 cents, or 1.1 percent, to $34.67. The company, which took in $533 million from its drug Keytruda this year, rose $4.32, or 7.5 percent, to $62.17.
