Friday’s Stock Market Open: US Equities Rise Despite Catastrophic April Jobs Report

Update: 12:05 p.m. EDT:

U.S. stocks sustained a rally as of noon Friday.

The Dow Jones Industrial Average gained 371.5 points to 24,247.39, while the S&P 500 rose 40.6 points to 2,921.79 and the Nasdaq Composite Index jumped 132.92 points to 9,112.58.

In Europe markets finished higher, as Britain’s FTSE-100 rose 1.4%, while France’s CAC-40 climbed 1.07% and Germany’s DAX gained 1.35%.

Original story:

U.S. stocks rose on Friday as traders shrugged off a historically bad April jobs report and focused on the U.S. economy gradually reopening businesses and on signs that trade tensions between Washington and China are easing.

The Dow Jones Industrial Average gained 309.09 points to 24,184.98, while the S&P 500 rose 29.64 points to 2,910.83 and the Nasdaq Composite Index jumped 58.3 points to 9,037.96.

The U.S. labor market lost a record 20.5 million jobs in April as the unemployment rate soared to 14.7%, the Labor Department reported Friday.

Timothy McBride, an economist at Washington University in St, Louis, tweeted: “This is the largest increase in the unemployed ever recorded in one month.”

Justin Wolfers, an economist at University of Michigan, tweeted: “This is obviously the steepest decline in labor market conditions ever, and I can almost guarantee that it's the worst that you'll ever see in your lifetime.”

“This is the biggest and most acute shock that we’ve seen in post-war history. It’s a dramatic loss of output in a very short period of time,” said Michelle Meyer, head of U.S. economics at Bank of America prior to the release of the April jobs report. “It’s understood leisure and hospitality and retail have seen a large displacement of workers, and that’s apparent in the claims numbers.”

Mark Zandi, chief economist at Moody’s Analytics, thinks job losses will peak in the next few weeks, and the jobless rate may jump to about 20% in May.

“Then we’ll get a bounce if we don’t get a second wave [of infections] in the summer months,” he said prior to the release of the April jobs report. “The unemployment rate will be cut in half by Election Day. Then we go nowhere fast until there’s a therapy we all feel good about — not only a vaccine but one that’s widely distributed.”

But Zandi warned things will not return to normal and many small businesses may never come back.

“It’s just the pervasive uncertainty. The virus is still out there and can come roaring back. People just won’t be traveling, business won’t be investing. There won’t be the same kind of global trade. People just won’t get back to normal. People will be distancing,” he said. “There’s going to be a lot of business failures and bankruptcies. You can already see it. They’re going to be in such a weakened state they [won’t] rehire the people they had before.”

Top trade officials from the U.S. and China spoke late Thursday to discuss trade issues, including the “phase one” deal which was signed in January, suggesting tensions may be easing between Beijing and Washington.

Some analysts were surprised by the recent rally in stocks, particularly tech names.

“It’s amazing really given we’re still working from home,” said J.J. Kinahan, chief market strategist at TD Ameritrade. “Our reality is we’re working from home and some of the economic demand would seem to be less, yet these stocks continue to fight through.”

Kinahan observed that traders appear to be expecting a swift reopening of the U.S. economy.

“There’s this sense of, ‘OK, we’re going to get back to work and things are going to be better.’ But at what pace are they going to get better, and will that be sustainable?,” he pondered.

Overnight in Asia, markets traded higher. The Shanghai Composite rose 0.83%; Hong Kong’s Hang Seng gained 1.04%; while Japan’s Nikkei-225 jumped 2.56%.

In Europe markets traded higher, as Britain’s FTSE-100 rose 1.4%, while France’s CAC-40 climbed 1.02% and Germany’s DAX gained 1.24%.

Crude oil futures gained 3.27% at $24.32 per barrel, Brent crude rose 2.55% at $30.21. Gold futures slipped 0.64%.

The euro edged down 0.04% at $1.0831 while the pound sterling was flat at $1.2362.