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Powell, Jobs, Trade Talk News Helped Markets Jump on January 4

Andrew Brunton
Powell, Jobs, Trade Talk News Helped Markets Jump on January 4

Powell, Jobs, Trade Talk News Helped Markets Jump on January 4## Stock market soaredAfter a massive sell-off on January 3, the major US indexes made a sharp recovery last Friday on several pieces of good news, thereby helping the market to end the first week of 2019 on a positive note finally. The Dow Jones, the S&P 500, and the NASDAQ Composite gained 3.3%, 3.4%, and 4.3%, respectively, on January 4. The indexes ended the first three trading days of the year with returns of 0.5%, 1%, and 1.6%, respectively.All 30 Dow Jones components recorded a sharp upswing on January 4. With an increase of 6.1%, Intel (INTC) stock was the biggest gainer among the Dow 30 components last Friday, followed by Caterpillar’s (CAT) and Boeing’s (BA) intraday gains of 5.5% and 5.2%, respectively.Apple (AAPL) also bounced back with a 4.3% rise last Friday. The stock had plunged nearly 10% the day before after warning about a possible quarterly sales target miss due to trade tensions between the US and China. Apple’s sales target miss forecast and weak US factory activity data had triggered a massive broader market sell-off on January 3, sending all the three major US indexes down by over 2.5%. The Technology Select Sector SPDR Fund (XLK) invests 16.8% of its funds in Apple.## Factors driving Friday’s rallyLast Friday’s stock market rally was a result of a trifecta of good news: a strong US job report, encouraging remarks on the interest rate policy from Fed Chair Jerome Powell, and progress with the US-China trade talks.The first positive news came in the form of the December 2018 job report published by the US Bureau of Labor Statistics, which says the domestic economy created a significantly higher-than-expected job report last month. According to the data, non-farm payrolls surged by 312,000 in December and surpassed economists’ consensus estimates of 176,000 polled by the Dow Jones.Additionally, monthly wages increased 3.2% from the year-ago quarter and 0.4% from the previous quarter. The latest data from the Bureau of Labor discarded concerns of a slowdown in the US economy. Later in the day, Powell at the American Economic Association event hinted that the central bank is ready to shift its stance on monetary policy and is flexible in deciding the timing of interest rate hikes. At the end of December, Powell had suggested raising interest rates three times in 2019. However, last Friday’s remarks pointed to a more liberal monetary policy from the Fed, and analysts and investors are expecting fewer or no hikes this year.Additionally, news of trade talks between the US and China, which are slated to begin today, also made investors think that the two largest economies may resolve their trade dispute this time.