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Stocks, Bond Yields Climb on Strong Jobs Report

06/12/2019 3:44pm

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By Avantika Chilkoti and Alexander Osipovich 

U.S. stocks and government-bond yields rose on Friday after a surprisingly upbeat monthly jobs report signaled strength in the U.S. economy, offsetting some of the jitters about trade that rattled investors earlier this week.

The Dow Jones Industrial Average advanced 279 points, or 1%, to 27971 in morning trading. The S&P 500 and the Nasdaq Composite both climbed 0.9%.

Employers added 266,000 jobs in November and unemployment matched a 50-year low of 3.5%, signs the U.S. economy is withstanding a global slowdown. Those numbers beat the projections of economists surveyed by The Wall Street Journal who estimated nonfarm payrolls increased by 187,000 and the unemployment rate remained at 3.6%.

Haven assets like gold and Treasurys slid, pushing the yield on the benchmark 10-year U.S. Treasury note up to 1.837% from 1.791% before the report and sending most-active gold futures down 1.1%.

"It's a very solid jobs report," said Michael Arone, chief investment strategist at State Street Global Advisors. "Since August you have seen recession fears recede, and this report continues to show that the U.S. economy is on a firm footing."

Household spending has proved to be crucial this year for U.S. economic growth, though the Federal Reserve has also cut rates three times to help bolster output amid rising fears of a global slowdown.

"All that's keeping it together from the U.S. perspective at the moment is the consumer," said James Athey, investment analyst at Aberdeen Standard Investments. Weak employment figures would have had knock-on effects for confidence and spending, he said ahead of the jobs data.

The report suggests that the Fed will keep interest rates on hold for the foreseeable future, analysts said. The key rate-setting committee of the U.S. central bank is set to meet next week, but Fed watchers expect it to keep rates steady in light of the positive economic data and its cuts earlier this year.

U.S.-China trade talks also remain in the spotlight for markets ahead of the Dec. 15 deadline for new tariffs on consumer goods to take effect.

At the end of a week that has seen markets react to conflicting signals on the progress of negotiations, China's State Council on Friday began the process of exempting some soybeans and pork imported from the U.S. from punitive tariffs, the state-run Xinhua News Agency said.

"I don't think there will be anything signed by the 15th, but they may well kick it into next year," said Tom Roderick, a portfolio manager at London-based hedge fund Trium Capital, adding that "both sides are playing nice at the moment" with little incentive to escalate tariffs.

Despite a rough start to December, major U.S. stock indexes are trading just below their records from late last month. Friday's rally put the S&P 500 on track for a modest weekly gain. The Dow industrials and Nasdaq Composite are still in the red for the week.

President Trump lauded the stock market's 2019 rally just before the jobs report, saying on Twitter, "Stock Markets Up Record Numbers. For this year alone, Dow up 18.65%, S&P up 24.36%, Nasdaq Composite up 29.17%. 'It's the economy, stupid.'"

In commodities, U.S. crude oil futures rose 1.7% after Saudi Arabia and other large oil-exporting countries signaled that they would cut production.

Overseas, the benchmark Stoxx Europe 600 index was up 1.1%. In Asia, the Shanghai Composite Index closed up 0.4%, while the Hang Seng rallied 1.1%.

U.K. markets remained volatile ahead of a general election next week. The FTSE 100 rallied 1.2% on Friday, lifted by the U.S. jobs data and speculation that Prime Minister Boris Johnson's Conservative Party will come out on top in the vote. Such an outcome would reduce uncertainty around the U.K.'s withdrawal from the European Union.

"The way the polls look at the moment, it's not going to be a narrow majority open to hostage-taking," said Mr. Roderick.

The pound dropped 0.2% against the dollar.

Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com and Alexander Osipovich at alexander.osipovich@dowjones.com

 

(END) Dow Jones Newswires

December 06, 2019 10:29 ET (15:29 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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