U.S. stocks bounced back from their worst two-day start to a year since 2000, soaring after fresh signs of economic strength eased fears that slowing growth around the world could drag on the U.S. expansion. The Dow Jones Industrial Average jumped nearly 750 points as better-than-expected hiring in December suggested a healthy labor market. Stocks rose further after Federal Reserve Chairman Jerome Powell said economic data suggests good momentum heading into the new year, but that the central bank is “prepared to adjust policy quickly and flexibly” if necessary. The combination mitigated investors’ worries about an economic slowdown. Those fears sent waves of volatility sweeping through stock and bond markets in recent weeks and drove the Dow industrials and S&P 500 to their worst December since 1931. On Friday, the blue-chip index rose 746.94 points, or 3.3%, to 23433.16 and the S&P 500 added 84.05 points, or 3.4%, to 2531.94, with both indexes ending the week more than 1% higher. The Nasdaq Composite gained 275.35 points, or 4.3%, to 6738.86, putting its weekly gain at 2.3%. Investors said it is unclear whether Friday’s gains mark an end to the recent swings or if they’ll prove fleeting. The S&P 500 has logged its second gain of at least 3% in the last seven trading sessions, a rare occurrence that tends to only happen during stressed markets, according to analysis by Frank Cappelleri, executive director at Instinet LLC. In the past decade, such a cluster of big gains occurred in August 2011, March 2009 and in the fall of 2008, his data shows. Futures climbed Friday morning, suggesting stocks were already poised for a bounceback. Then the surprise: U.S. nonfarm payrolls increased a seasonally adjusted 312,000 in December, the Labor Department said Friday, the biggest jump since February. Average hourly earnings also rose, notching their best full-year gain since 2008. Investors parse jobs reports for clues on the health of the U.S. economy and for their significance to Fed policy, which has given many cause for concern in recent months. Economists polled by The Wall Street Journal had forecast the addition of 176,000 jobs to the U.S. economy in December. “These numbers are not consistent with a recession in 2019,” said Darrell Cronk, chief investment officer for wealth and investment management at Wells Fargo & Co. He added that while he expects global growth and U.S. economic growth to slow this year, he believes many investors have become too pessimistic.
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The U.S. dollar gave up gains scored in the wake of a stronger-than-expected December jobs report after Federal Reserve Chairman Jerome Powell said the central bank would take a “patient” approach to monetary policy. The ICE U.S. Dollar Index , a measure of the currency against a basket of six major rivals, was off 0.1% at 96.168 after surging as high as 96.60 following data that showed the U.S. added 312,000 new jobs in December, far exceeding the consensus forecast of 182,000 produced by a MarketWatch survey of economists. The unemployment rate rose to 3.9% from a 49-year low of 3.7% as the percentage of working-age Americans in the labor force climbed to a five-year high. The dollar’s initial advance reflected expectations the Fed would be more likely to stick to its rate-hiking path as solid jobs data undercut worries the economy had started to slow significantly. But those gains were given back after Powell, in a panel discussion alongside predecessors Janet Yellen and Ben Bernanke, stressed that the central bank wouldn’t push interest rates higher or continue to shrink its balance sheet regardless of cost. “We will be prepared to adjust policy quickly and effectively,” he said. Powell “struck a softer, more dovish tone when speaking on a panel at the American Economic Association. His more dovish leaning, coming on the heels of the superlative December employment report has, for now, assuaged financial market investors,” said Kathy Bostjancic, head U.S. financial market economist at Oxford Economics, in a note. The euro changed hands at $1.1405, up from $1.1395 late Thursday. On Thursday, the Japanese yen soared in volatile and thin trade in early Asia Pacific hours following Apple’s rare sales forecast cut. The dollar rose to 108.46 yen, up from 107.66 late Thursday. The British pound rose to $1.2744 versus $1.2634 late Thursday.
The Stoxx Europe 600 closed sharply higher, up 3.4% at 343.88, led by gains in oil-related and mining stocks, after strong U.S. jobs data, comments by U.S. Federal Reserve Chairman Jerome Powell that the Fed could shift policy if needed and earlier better-than-expected data out of China. “Perhaps more questions will be asked come Monday and the start of a new week, but for today the bulls are firmly in control,” IG analyst Chris Beauchamp said. Shares in Aker BP jumped 9%, Tullow Oil lifted 6.9% as Brent crude advanced 2%. Chilean copper miner Antofagasta gained 6.45%, while German pharma giant Bayer jumped 6.6% after a court victory in the run-up to trials over whether recently-acquired Monsanto Co. weedkillers can cause cancer. Germany’s DAX ended up 3.4%, France’s CAC 40 up 2.7%, the U.K.’s FTSE 100 up 2.2%, Italy’s FTSE MIB up 3.4% and Spain’s Ibex 35 rose 2.5%.
Stock markets also rallied in Asia, where the Shanghai Composite Index, the Shenzhen A-Share and the Hang Seng all rose more than 2%. Japan’s Nikkei returned to trading after a public holiday to drop 2.3% in a delayed reaction to losses across global markets earlier in the week. Markets rallied ahead of the release of those U.S. jobs figures, after China’s commerce ministry said that a U.S. trade delegation led by Deputy Trade Representative Jeffrey Gerrish will visit China on Monday and Tuesday. Equities markets also showed some relief after House Democrats passed a spending package aimed at reopening the federal government, even though adoption by the Senate appeared unlikely. Upbeat data from a private gauge of China’s services sector, as well as a move by the People’s Bank of China’s to support growth by lowering banks’ reserve requirement ratio, also supported Asian markets. On the trade front, while the Trump administration rhetoric was bellicose in the initial stages of the dispute with China, recent stock selloffs may prompt a more conciliatory attitude, some market participants say.