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Dow Rebounds as Stunning Jobs Data Distract from Manufacturing Recession

Dow Rebounds as Stunning Jobs Data Distract from Manufacturing Recession
  • The Dow, S&P 500, and Nasdaq all rebounded on Friday, ending the week on a high note and starting off the new month with a bang.
  • A surprisingly strong jobs report emboldened stock market bulls, as the economy beat estimates despite pressure from the GM strike.
  • The enthusiastic response to the jobs report distracted from other worrisome economic data releases.

The Dow bounced back from its Halloween haunting on Friday after a stunning jobs report distracted from foreboding economic data.

Dow Snaps Toward a Recovery After Strong Non-Farm Payrolls Data

Wall Street’s three major indices rose in unison. The Dow Jones Industrial Average jumped 157.04 points or 0.58%, erasing its Oct. 31 losses and climbing back to 27,203.27.

Bullish jobs data launched the Dow toward a triple-digit recovery. | Source: Yahoo Finance

The S&P 500 rallied 16.41 points or 0.54%. Now trading at 3,054.22, the large-cap index has the potential to set yet another record high.

The Nasdaq recorded a similar bounce, adding 43.77 points or 0.53% to settle at 8,336.13. If today’s gains hold, the Nasdaq could join the S&P 500 in setting a new highwater mark.

The gold price declined by 0.27% as equities spiked. The yellow metal had basked in Thursday’s risk-off climate, which allowed it to reclaim the psychologically-significant $1,500 level.

Stock Market Reacts to Spectacular Jobs Report

A surprisingly-strong jobs report emboldened Dow bulls, who had already prepared to shrug off any dismal statistics as outliers caused by the prolonged General Motors strike.

However, those excuses turned out not to be necessary, because nonfarm payrolls jumped by 128,000 anyway, easily smashing the Dow Jones economist estimate of 75,000.

Even better, August and September payrolls data were both revised upward, resulting in a net addition of 95,000 more jobs. The economy is now creating an average of 167,000 jobs per month, down from 223,000 in 2018.

Manufacturing Recession Hangs Over Economy

In isolation, Friday’s jobs report would be expected to fortify economic forecasts against recession warnings. However, the manufacturing sector is already in a recession, and the apparent breakdown in trade war optimism suggests that the gloomy picture won’t change anytime soon.

On Thursday, Chicago PMI – a key measure of regional business sentiment – plunged to a nearly four year low of 43.2, missing economist estimates by a wide margin. Readings below 50 indicate contraction.

Chicago PMI is more volatile than ISM Manufacturing PMI, which will be released at 10 am ET this morning.

To be sure, manufacturing comprises a much leaner slice of the US economy than in the sector’s glory days. A recent Bloomberg report found that, contrary to President Trump’s promise to make American manufacturing great again, US factory output’s contribution to GDP floundered at 11% in the second quarter– its lowest point in 72 years.

The industry’s decline is a silver lining for the economy’s overall picture, given that PMI printed readings below 50 in each of the past two months. Economists expect that streak to extend to three, with the consensus forecast predicting a reading of just 49.

Solid consumer data figures continue to buttress GDP against the manufacturing slowdown. However, consumer data tends to lag business indicators, and – strong job creation notwithstanding – business investment has begun to decline.

Click here for a live Dow Jones Industrial Average chart.

This article was edited by Sam Bourgi.

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