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June 4, 2021, 4:22 p.m. EDT

U.S. stocks end higher as May jobs report invokes bullish ‘Goldilocks’ scenario

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By Christine Idzelis and Mark DeCambre

U.S. stocks closed higher Friday and ended the week up after the May nonfarm-payrolls report showed a less-than-expected gain, leading investors to bet that the Federal Reserve will maintain its easy-money policies for longer.

How is the stock market performing?

  • The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.30% rose 179.35 points, or 0.5%, at 34,756.39.

  • The S&P 500 index /zigman2/quotes/210599714/realtime SPX -1.89% advanced 37.04 points to 4,229.89, a gain of 0.9%, led by gains in the technology /zigman2/quotes/207444675/composite XLK -1.99% and consumer-discretionary /zigman2/quotes/200844504/composite XLY -2.93% sectors.

  • The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -2.72% rose 200 points, or 1.5%, to 13,814.49.

On Thursday , the Dow closed down 23.34 points, or 0.1%, at 34,577.04, snapping a five-day win streak. The S&P 500 stumbled 15.27 points, or 0.4%, to 4,192.85, while the Nasdaq Composite declined 141.82 points, or 1%, to 13,614.51.

For the week, the Dow gained 0.7%, the S&P 500 rose 0.6% and the Nasdaq advanced 0.5%, FactSet data show.

What’s driving the market?

May’s employment report from the U.S. Labor Department showed that the U.S. created 559,000 jobs, falling short of The Wall Street consensus estimate for a gain of 671,000, based on a poll of economists by Dow Jones and The Wall Street Journal.

Investors breathed “a sigh of relief” after the jobs report today because it was neither so wildly disappointing as the reading for April nor so hot as to make them fear the Federal Reserve will now move more quickly in raising interest rates, according to Bob Doll, the new chief investment officer of Crossmark Global Investments .

“It was a little on the weak side versus consensus, but not horribly so,” Doll, who joined the faith-based investment firm from asset manager Nuveen, said Friday in a phone interview. “The market was fearful after last month’s disappointment .” 

The unemployment rate fell to 5.8% from 6.1%, compared with estimates of a dip to 5.9%. The official rate probably understates the true level of joblessness by 2 to 3 percentage points, economists say, but it is falling steadily.

The May report, however, will likely be interpreted as bullish for the market overall, if it leads the Fed to delay removing its pandemic-era monetary support, including the $120 billion a month asset-purchase plan.

“It’s pretty much a goldilocks scenario, not too soft to have sparked fears of a weak economic recovery, and not too strong to have caused concern about accelerated Fed action,” wrote Mike Loewengart, managing director, investment strategy at E-Trade Financial, in emailed comments.

But in Doll’s view, the market still faces the threat of inflationary pressures.

“I don’t think it’s all transitory, as the Fed suggests,” Doll said. “All you have to do is live life and see all the ‘help wanted’ signs everywhere,” with companies having to entice workers with higher wages to fill jobs, he said. “The zero-to-2% inflation world that we’ve been in for a long time is probably over.”

The May employment report showed that many companies have increased wages to lure workers. Average hourly pay rose 15 cents, or 0.5%, to $30.33 an hour last month. The labor-force participation rate, another closely watched metric, edged lower to 61.6%.

Charlie Ripley, senior investment strategist for Allianz Investment Management, also pointed to wage inflation creeping into the job market, saying that with the labor-force participation rate ticking lower “it appears like employers may need to offer up more incentives to entice workers to fill the record number of job openings that are out there.”

The government data come after April data showed that just 266,000 new jobs were created on a seasonally adjusted basis, significantly missing economists’ forecast that had come in on average at around 1 million.

The nonfarm-payrolls data also follow a reading of private-sector employment from Automatic Data Processing on Thursday, which reported a 978,000 increase in jobs created in May. However, the ADP reports haven’t always aligned with the more closely watched government report.

Meanwhile, the technology-heavy Nasdaq Composite index outperformed the two other major U.S. stock benchmarks Friday.

US : Dow Jones Global
-450.02 -1.30%
Volume: 523.88M
Jan. 21, 2022 4:52p
-84.79 -1.89%
Volume: 3.20B
Jan. 21, 2022 4:52p
US : U.S.: NYSE Arca
$ 154.33
-3.13 -1.99%
Volume: 24.01M
Jan. 21, 2022 4:00p
US : U.S.: NYSE Arca
$ 180.42
-5.45 -2.93%
Volume: 18.70M
Jan. 21, 2022 4:00p
US : Nasdaq
-385.10 -2.72%
Volume: 5.01M
Jan. 21, 2022 5:16p
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