Stocks pull a U-turn and soar after jobs report, trade talks

Marley Jay, The Associated Press</span>
Published Friday, January 4, 2019 6:13AM EST
Last Updated Friday, January 4, 2019 11:22AM EST

NEW YORK -- Global stocks are soaring Friday and reversing the big losses they suffered just a day ago. The Dow Jones Industrial Average soared almost 600 points in the latest twist in a wild three months for markets.

Hopes for progress in the U.S.-China trade dispute, a strong report on the U.S. jobs market and comments from the head of the U.S. central bank about its interest rate policy all combined to cheer investors.

China's Commerce Ministry said trade talks will be held Monday and Tuesday in Beijing and market watchers are once again looking for signs the world's largest economic powers will make progress toward resolving their dispute. The trade tensions have dragged on for nearly a year and uncertainty over their outcome has dragged down stock indexes around the world.

Meanwhile the Labor Department said U.S. employers added 312,000 jobs last month, a far stronger result than experts had anticipated. U.S. stocks have tumbled over the last three months as investors worried that the economy might slow down dramatically because of a variety of challenges including the trade dispute and rising interest rates. The stock market's plunge also threatened to shake up the confidence and the spending plans of businesses and consumers. Some analysts said investors were acting as if a recession was on the horizon, despite a lack of evidence that the U.S. economy is struggling.

"It's hard to square recession worries with the strongest job growth we've seen in years," said Alec Young, managing director of global markets research for FTSE Russell. "The strong December jobs report is a net positive for stocks because investors' biggest concern has been slowing growth."

Stocks rose even further after Federal Reserve Chairman Jerome Powell said the central bank will be flexible in deciding if and when it raises interest rates. He added that the Fed is open to making changes in the way it shrinks its giant portfolio of bonds. Recently investors were rattled when Powell seemed to suggest the Fed was intent on raising rates further after gradual increases over the past three years. He also implied the Fed didn't plan to make changes to the runoff of the bond portfolio.

The S&P 500 index climbed 65 points, or 2.7 per cent, to 2,512 at 11:30 a.m. Eastern time, more than wiping out Thursday's loss. The Dow added 578 points, or 2.6 per cent, to 23,254 after rising as much as 691 points. The Nasdaq composite jumped 231 points, or 3.6 per cent, to 6,694.

The U.S. and China have raised tariffs on billions of dollars of each other's goods in a fight over issues including Beijing's technology policy, which Washington alleges is predatory. Last month, President Donald Trump and Chinese leader Xi Jinping agreed to 90-day ceasefire as a step toward defusing tensions.

Technology companies, banks, health care and industrial companies all made strong gains. Microsoft rose 4.4 per cent to $101.70 and Deere gained 3.7 per cent to $149.31. Retailers and internet companies rose as well, with Amazon up 4.1 per cent at $1,561 and Google's parent company, Alphabet, rising 4.1 per cent to $1,067. Most of the companies in those industries stand to do better in times of faster economic growth.

On Thursday the S&P 500 fell 2.5 per cent after Apple said iPhone sales in China are falling and a survey suggested U.S. factories grew at a weaker pace. Technology companies took their biggest losses in seven years.

Smaller and more U.S.-focused companies did even better than larger multinationals. The Russell 2000 index surged 41 points, or 3.1 per cent, to 1,372. Smaller companies have fallen further than larger ones in the last few months as investors got nervous about how the U.S. economy will perform in 2019 and 2020.

Bond prices also changed course and moved sharply lower. The yield on the 10-year Treasury note rose to 2.65 per cent after it plunged to 2.55 per cent Thursday, its lowest in almost a year. That helps banks, as higher interest rates allow them to make bigger profits on mortgages and other loans.

JPMorgan Chase rallied 2.4 per cent to $99.45 and Citigroup rose 4 per cent to $54.67.

European shares recouped losses from a day earlier, with Germany's DAX gaining 3.4 per cent and France's CAC 40 rising 2.9 per cent. Britain's FTSE 100 advanced 2.3 per cent.

In Asia, Hong Kong's Hang Seng jumped 2.2 per cent. South Korea's Kospi added 0.8 per cent. Japan's Nikkei 225 index fell 2.3 per cent on its first day of trading in 2019 as technology and electronics makers slumped on Apple's report that Chinese iPhone sales were slipping.

U.S. crude oil surged 2.4 per cent to $48.21 a barrel in New York. Brent crude, used to price international oils, was up 3.1 per cent to $57.66 per barrel in London.

The dollar strengthened. It rose to 108.27 yen from 107.77 yen. The euro rose to $1.409 from $1.1391. The British pound moved up to $1.2717 from $1.2630.

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Associated Press Writer Annabelle Liang contributed to this story from Singapore.

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