Stocks rose to record levels on Friday even after a disappointing April jobs report as the weak number made investors believe easy monetary policies that powered the market’s historic rebound will stay in place for longer.
The S&P 500 climbed 0.9% to hit a intraday record high. The Dow Jones Industrial Average rose 250 points, also reaching an all-time high. The tech-heavy Nasdaq Composite popped 1%.
The Labor Department said nonfarm payrolls increased by just 266,000 in April, far less than the 1 million total economists were expecting, according to Dow Jones. The unemployment rate rose to 6.1% last month amid an escalating shortage of available workers, higher than an expectation of 5.8%. Meanwhile, March’s originally estimated total of 916,000 was revised down to 770,000.
Investors bet that the big jobs miss could keep the easy policies of the Federal Reserve in place, including record low interest rates and a massive bond-buying program. Tech stocks, which have been winning under the low-rates regime during the pandemic, outperformed after the data release. Facebook, Amazon, Netflix, Alphabet, and Apple all traded in the green. Tesla rose nearly 2%. Higher rates tend to hit growth stocks the most since they reduce the value of their future earnings.
“The Fed will feel some vindication in their hesitancy to embrace tapering,” Adam Crisafulli, founder of Vital Knowledge, said in a note following the jobs report Friday.
Bank of America research warned as recently as Friday that strong economic data could hit stocks, especially tech shares, if it caused the central bank to dial back on its easy monetary policies.
Still, the disappointing jobs number poured cold water on many economists who estimated a sharp rebound in job growth. Goldman Sachs economists expected a total of 1.3 million jobs to have been added in April.
It also cast doubt on whether the economy could pull off a full recovery from the pandemic as quickly as many expect. Some economists are forecasting double-digit growth in the current quarter after gross domestic product rose at a 6.4% annualized pace in the first quarter. The Dow hit another record on Thursday on expectations for a booming economy.
“It was a disappointing read on job creation and brings into question the assumption that Q2 is going to carry-forward the positive momentum established at the beginning of the year,” Ian Lyngen, head of U.S. rates at BMO, said in a note.
Bank stocks fell in wake of the report, weighing on the market a bit.
Some believe that April’s jobs number could just be a blip and it shouldn’t change minds about the direction of the U.S. economy.
“It was a huge surprise,” Goldman Sachs chief economist Jan Hatzius said on CNBC’s “Squawk on the Street.” “I think that you always have to take every data release with a grain of salt and this one I think you may have to take with a rock of salt,” he said, citing seasonal adjustments as a potential source of error.
Shares of Roku rallied more than 15% after the streaming company blew past expectations with its first-quarter results. Roku posted adjusted earnings of 54 cents per share, compared to an estimated loss of 13 cents per share, according to Refinitiv. Revenue rose 79% from a year ago and exceeded expectations.
For the week, the Dow is up more than 2%, while the S&P 500 has gained 1%. The Nasdaq Composite had shed 1.5% so far this week.
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