U.S. Stocks Extend Rally On Jobs Data, Senate Passing Debt Ceiling Bill

Stocks moved sharply higher over the course of the trading day on Friday, adding to the strong gains posted in Thursday’s session. With the continued upward move, the Nasdaq reached its best closing level in well over a year, while the S&P 500 set a new nine-month closing high.

The major averages pulled back off their best levels going into the close but still posted strong gains. The Dow spiked 701.19 points or 2.1 percent to 33,762.76, the Nasdaq jumped 139.78 points or 1.1 percent to 13,240.77 and the S&P 500 surged 61.35 points or 1.5 percent to 4,282.37.

For the holiday-shortened week, the S&P 500 shot up by 1.8 percent, while the Dow and the S&P 500 both jumped by 2.0 percent.

The extended rally on Wall Street came following the release of a closely watched Labor Department report showing U.S. employment surged by much more than expected in the month of May.

The report showed non-farm employment soared by 339,000 jobs in May after spiking by an upwardly revised 294,000 jobs in April.

Economists had expected employment to climb by 190,000 jobs compared to the jump of 253,000 jobs originally reported for the previous month.

Meanwhile, the Labor Department said the unemployment rate rose to 3.7 percent in May from 3.4 percent in April. The unemployment rate was expected to inch up to 3.5 percent.

“It’s hard to say which is the bigger surprise, the huge, unexpected rise in payrolls or the equally huge, unexpected rise in the unemployment rate,” said Chris Low, Chief Economist at FHN Financial.

“From the Fed’s perspective, the rise in unemployment coupled with the drop in average hourly earnings should outweigh the shock of another huge job gain,” he added. “After all, the weaker numbers stand in support of a pause they were leaning toward anyway.”

Positive sentiment was also generated in reaction to news the Senate voted to pass the bill raising the U.S. debt ceiling late Thursday night.

The Senate voted 63 to 36 in favor of the debt ceiling bill, with 17 Republicans joining with the majority of Democrats to approve the legislation.

Following the House approval of the bill Wednesday night, the bill now heads to President Joe Biden, who is expected to sign the legislation later today.

“No one gets everything they want in a negotiation, but make no mistake: this bipartisan agreement is a big win for our economy and the American people,” Biden said in a statement following the Senate vote.

The passage of the bill eliminates the threat of a potentially disastrous default by the U.S. government, which had been hanging over the markets in recent weeks.

Sector News

Oil service stocks moved sharply higher along with the price of crude oil, driving the Philadelphia Oil Service Index up by 5.5 percent.

The rally by oil service stocks came as the price of crude oil for July delivery jumped $1.64 to $71.74 a barrel.

Substantial strength was also visible among steel stocks, as reflected by the 5.3 percent spike by the NYSE Arca Steel Index.

Banking stocks also showed a significant move to the upside, resulting in a 3.7 percent surge by the KBW Bank Index.

Housing, airline and chemical stocks also saw considerable strength on the day, while gold stocks were among the few groups to buck the uptrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan’s Nikkei 225 Index shot up by 1.2 percent, while Hong Kong’s Hang Seng Index soared by 4.0 percent.

The major European markets have also moved to the upside on the day. While the French CAC 40 Index spiked by 1.9 percent, the U.K.’s FTSE 100 Index surged by 1.6 percent and the German DAX Index jumped by 1.3 percent.

In the bond market, treasuries gave back ground after moving higher over the three previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, advanced 8.3 basis points to 3.691 percent.

Looking Ahead

The U.S. economic calendar is relatively quiet next week, although traders are still likely to keep an eye on reports on service sector activity, the trade deficit and initial jobless claims.

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