Bad news for the economy can often be interpreted as good news for stocks, further revealing the disconnect that sometimes exist between Wall Street and Main Street. Stocks surged to all-time highs on Friday, despite a much-weaker-than-expected April jobs report that also sent the unemployment rate slightly higher. But for how long can this disconnect continue?
The Labor Department on Friday reported the U.S. economy added 266,000 jobs in April, which badly missed the consensus forecast for a rise of 1 million. The market seems to shrug the disappointing jobs number, which pushed unemployment rate also to 6.1%. Instead, investors are assessing just how far weve come from a year ago when theunemployment rate was near 15%, the worst rate since the Great Depression. The market is now looking out to the next several months expecting significantly better results from the reopening of the economy.
Both the Dow Jones Industrial Average and the S&P 500 index on Friday ended at new records, while the technology-heavy Nasdaq Composite index reverse earlier declines to end almost 1% higher, driven by tech heavyweights Tesla ((TSLA)), Amazon (AMZN), Apple (AAPL), Facebook (FB) and Microsoft ((MSFT)), among others. The Dow closed up 229.23 points to close at 34,777.76, adding 0.7%, establishing an intraday record high at 34,811.39. Friday was the Dows 24th record close on the year.
The S&P 500 index also notched intraday all-time high at 4,238.04, while ending the session at 4,232.60, gaining 30.98 points, or 0.7%. The aforementioned Nasdaq led the charge, gaining 119.39 points to closed at 13,752.24. Despite the Nasdaqs strong performance Friday, it still ended the week with a loss of 1.5%, marking the third consecutive week of decline. The Dow, meanwhile, snapped a two-week losing streak and ended up 2.7%, while the S&P 500 rose 1.2% for the week.
Can Fridays market rally continue into next week? Will the strong revenue and profit growth trend we have witnessed continue into the second quarter, particularly from industries that were most-impacted by the pandemic? This topic is what is continues to sway the growth versus value trade. With three-quarters of the S&P 500 having already reported earnings, that answer is still unclear. Maybe well get some confirmation sooner rather than later, perhaps this week.