Markets reacted to the lackluster jobs report Friday, bidding stocks higher in hopes that the economy was recovering enough–but, not too much.
Investors are hopeful that the Federal Reserve will continue its low-interest rate policy and bond-buying program for the foreseeable future. As such, any suggestion that the economy might be fully recovered might spark a change in Fed policy and a pullback in markets.
By mid-day, the Dow traded up 94 points at 34,672.86, the S&P 500 was up 28 points at 4,221 and, the Nasdaq was up 185 at 13,802.
The economy added 559,000 jobs last month, fewer than the 650,000 economists had anticipated. The unemployment rate, encouragingly, dropped to 5.8% from 6.1%.
The leisure and hospitality industry added the most number of jobs, with a gain of 292,000.
Hey, we’ll take it! After all, this May report is a massive improvement over April’s dismal showing of just 278,000 jobs added, when economists had anticipated 1 million.
Why The Market Rally Gets To Live Another Day
The key now is to continue this economic momentum. This means more states may need to scale back on federal benefits in an effort to grow the labor pool. Without workers, our economy will not succeed.
As for the Fed, well, you know how I feel; we run the risk of creating a massive asset bubble that will one day go, ‘pop!’
But, that day isn’t here yet. At present, the yield on the 10-year treasury bond is still tame…meaning, the rally gets to live another day.