September 22, 2023

Markets Soar to New Highs on Jobs Data

The indexes’ surge to fresh records was propelled by the announcement that the economy added 168,000 jobs in April and significantly more than had been initially reported in February and March.

The job growth is still barely enough to keep up with the expansion of the population, but just a few weeks ago stock prices were falling on fears that the labor market might be shrinking.

Investors have become accustomed to big slowdowns in late spring; downturns have hit about this time each of the last three years. This time around, though, the economic data is showing signs of improvement and there are few of the looming threats that sent markets into tailspins in previous years.

“We worried about a double dip each of the last few years,” said Michelle Girard, the chief United States economist at RBS Securities. “I don’t think we will get to that point this time.”

“The U.S. is on more solid footing than at any point in the last couple years,” she added.

The blue-chip Dow briefly rose above 15,000 before slipping back later in the day. But it still finished at a record, up 1 percent, or 142.38 points, at 14,973.96.

The S.P. 500 climbed 1 percent, or 16.83 points to 1,614.42. The Nasdaq composite index rose 1.1 percent, or 38.01 points to 3,378.63. The technology-heavy index is still well below the peak it hit during the dot-com boom in 2000.

The gains built on a nearly two-week long rally that has brought the S.P. 500 up 13.2 percent for the year. The dissipating concerns were also evident in the sell-off in Treasury bonds, which investors have flocked to in times of danger. The interest rate on the 10-year government bond rose to 1.741 percent, up 11.5 basis points.

Still, the outlook is not entirely rosy. Chinese growth, one of the few reliable engines of the global economy, has been slowing more than expected. Meanwhile in Europe, most countries have fallen into recession again. The Cypriot banking crisis earlier this year showed how sensitive traders still are to any flare-up of problems in Europe’s financial system. Last summer’s market swoon was set off by fears that Greece would have to leave the European Union.

But investors have been comforted by the European Central Bank’s insistence that it will provide a backstop if there are new problems on the continent. This week, the central bank dropped its benchmark interest rate to the lowest level ever in an effort to encourage economic growth. Stock indexes across Europe are up this year, and rose Friday after the jobs report.

The moves by the E.C.B. provide a reminder of just how important central banks have been in the market’s recovery since the 2008 financial crisis. In the United States, the Federal Reserve gave reassurances this week that it was not planning to taper off its economic stimulus programs any time soon.

While the easy money has been a big help to banks, there are signs that the Fed policy is beginning to provide support for the real economy as well. The employment report on Friday showed that the size of the United States work force grew in March, while the number of long-term unemployed shrunk.

But the new data, like many other recent economic reports, was more indicative of slow expansion than roaring growth. A survey of the American service sector, released Friday, showed the lowest level of growth since last summer.

“These numbers aren’t going to be bringing down the unemployment rate in a serious fashion,” said Jonathan Lewis, the chief investment officer at Samson Capital Advisors. “No one is going to say it is robust, but people were so geared up for a weaker than expected number that these numbers have led to a lot of buoyancy in the market.”

The meager growth has made it hard for companies to expand their revenues. In the first quarter of this year, revenues have been flat among companies in the SP 500, according to Thomson Reuters. But companies have used cost cutting, and the easy availability of credit to continue to rake in record profits, the most important factor in stock prices.

Share prices have risen so quickly this year that there are questions about whether it can continue without economic growth picking up. If it does slowdown, though, strategists are expecting it to be more gradual, unlike the vacation-interrupting crises of recent summers.

“The further we get from the crisis, the more it clear that central bankers have put a floor on the next big event,” Mr. Lewis said. “It seems less likely that you’ll have that sudden severe sell-off.”

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