Wall Street jumps, Nasdaq set for record closing high after surprise jobs report

NEW YORK (Reuters) – Wall Street surged on Friday, and the Nasdaq was on course to set a new record closing high after the May jobs provided an astounding upside surprise and the clearest evidence yet that the U.S. economy is bouncing back sooner than expected from pandemic-related lockdowns.

The Nasdaq is set to be the first among the three major U.S. stock indexes to reclaim all-time highs reached in February. The S&P 500 and the Dow are now within 6% and 8% of overtaking their record closing levels.

The benchmark S&P 500 is now within one percent of showing a year-to-date gain.

The U.S. economy added a remarkable 2.5 million jobs last month, rebounding from April’s record 20.7 million payrolls drop and pushing the unemployment rate down to 13.3%. Analysts saw unemployment soaring to a historic 19.8%.

“I don’t think anybody anticipated this,” said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

“It has confirmed what many folks were suggesting – that the effects on the labor market from the pandemic were temporary and that when the economy reopened and the infection rates started to diminish, that these jobs would come back.”

“This report confirms that.”

U.S. Treasury yields rose on the jobs data, giving a boost to interest rate-sensitive banks and sending the S&P 500 Banks index up 5.5%.

Airlines, among the hardest hit by the coronavirus crisis, soared, with the ARCA Airlines index jumping 8.5%.

But the World Health Organization warned that the COVID-19 pandemic, which brought the global economy to its knees in the wake of mandated shutdowns, is far from over and new cases are on the rise.

Market participants now turn their focus to the U.S. Federal Reserve, at whose monetary policy meeting next week the latest jobs data will almost certainly be discussed.

The Dow Jones Industrial Average rose 891.6 points, or 3.39%, to 27,173.42, the S&P 500 gained 87.41 points, or 2.81%, to 3,199.76 and the Nasdaq Composite added 207.37 points, or 2.16%, to 9,823.18.

All 11 major sectors of the S&P 500 were in the black, with energy, financials and industrials leading the gainers in a continuation of a rotation into cyclicals, which were beaten up amid economic lockdowns.

Small caps and transportation stocks also outperformed, with the Russell 2000 and Dow Transportation up 4.7% and 3.9%, respectively.

Boeing Co surged 12.2%, giving biggest the blue-chip Dow its biggest boost, on hopes of a pickup in air travel a day after American Airlines Group Inc and United Airlines said they would boost their U.S. flight schedule next month.

Shares of luxury retailer Tiffany & Co jumped 5.5% after Reuters reported LVMH’s $16.2-billion takeover deal was back on track.

Drugmaker Novavax Inc advanced 2.8% after announcing it would receive up to $60 million from the U.S. Department of Defense to manufacture its COVID-19 vaccine candidate.

Advancing issues outnumbered declining ones on the NYSE by a 6.08-to-1 ratio; on Nasdaq, a 3.70-to-1 ratio favored advancers.

The S&P 500 posted 24 new 52-week highs and no new lows; the Nasdaq Composite recorded 82 new highs and 2 new lows.

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