What’s happening: US stocks ended the week sharply higher, despite the Labor Department reporting a loss of more than 20 million jobs in April.
What happened: The US has been facing its biggest economic crisis in about a century due to the coronavirus outbreak.
The pandemic has resulted in the loss of 20.5 million jobs in just one month, driving the unemployment rate to a record high of 14.7%. This is specially stark compared to the employment rate just two months back, when it was at a 50-year low level of 3.5%. The Bureau of Labor Statistics painted a grimmer picture, saying that the jobless rate would have surged to around 20% if furloughed employees were included in the figure.
Despite this, investors are hopeful of an economic recovery and believe that the current woes have already been priced into the numbers.
Why it matters: The US stock market shrugged off the disappointing employment report to close Friday on a stronger note. It also recording the highest weekly gain in almost a month. Although the US economy lost 20.5 million jobs last month, the number was below the expectation of 22 million job losses.
Another reason for positive investor sentiment is that employers have classified 18 million of the 20.5 million job losses as temporary. They believe employment will bounce back when the economy reopens completely.
The US equity market also seemed to be cheering the reopening of various economies around the world, with countries easing lockdown restrictions.
Investor sentiment was also lifted by reports of the US Trade Negotiator Robert Lighthizer and Chinese Liu He holding talks over the phone that resulted in both nations agreeing to strengthen their trade ties. US President Donald Trump had earlier in the week blamed China for mishandling the COVID-19 outbreak and threatened to impose more tariffs on imports from the country.
The Dow jumped 455.43 points on Friday to close the week higher by 2.6%. The S&P 500 gained 3.5% in the week and closed at 2,929.80 on Friday, while the Nasdaq 100 index climbed 6% last week, erasing all its losses for the year.
In corporate news, shares of Uber Technologies rose 6% after the company reported its first-quarter results. The company faced weakness in its ride-hailing business but showed strength in its food-delivery business. Herbalife Nutrition’s stock spiked around 12% after the nutritional supplements firm reported better-than-expected quarterly results.
In other news, June gold declined 0.7% to end at $1,713.90 an ounce, while the US dollar index, which measures the greenback’s performance versus a basket of six rival currencies, closed mostly flat.
What to watch: Investors look forward to the US economy returning to its normal growth trajectory following the easing of lockdown restrictions. There are some fears, however, of the early reopening resulting in a second wave of coronavirus cases in the country. Investors are carefully monitoring share price movements.
US stocks are expected to continue the positive momentum today, with the stock futures pointing towards a higher start on Wall Street. The economic calendar is light today, with the country expected to release only consumer inflation data.
Investors will also be monitoring daily coronavirus numbers, with the global cases going past the 4 million market. The US has so far confirmed around 1,329,790 COVID-19 cases with 79,520 deaths.