NEW YORK (Reuters) – Global equity markets and bond yields rose on Friday after U.S. employment and manufacturing data underscored a strong economy with little wage inflation, a Goldilocks mix that could allow the Federal Reserve to stand pat on raising interest rates soon.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., February 1, 2019. REUTERS/Brendan McDermid
U.S. job growth surged in January, with employers hiring the most workers in 11 months, the Labor Department said, while the U.S. ISM manufacturing index rose more than consensus estimates as its “prices paid” index slipped more than expected.
Prices in the U.S. futures markets show traders see no rate hikes ahead, though short-term futures indicate they remain convinced the U.S. central bank’s next move will be a rate cut rather than a hike.
Stocks resumed a rally that pushed many equity markets to post their best January in years. MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.12 percent, while the pan-European STOXX 600 index rose 0.21 percent.
The strong jobs number and little inflation smacked of a Goldilocks economy that is not overheating or too cold to fall into recession. The Fed may hike one more time in 2019, but after its policy statement on Wednesday urging patience, that would happen only in the second half of the year, said Yousef Abbasi, global market strategist at INTL FCStone Financial Inc in New York.
“The story being told here is the economy is healthy but inflation continues to face challenges,” he said. “This makes even more a compelling argument for the stock market.”
The Dow Jones Industrial Average .DJI rose 146.6 points, or 0.59 percent, to 25,146.27. The S&P 500 .SPX gained 7.3 points, or 0.27 percent, to 2,711.4 and the Nasdaq Composite .IXIC added 1.17 points, or 0.02 percent, to 7,282.91.
Exxon Mobil Corp (XOM.N) rose 4.01 percent and Chevron Corp (CVX.N) jumped 3.12 percent after the oil majors reported better-than-expected quarterly profits, boosting the Dow Jones industrial index. Amazon.com Inc (AMZN.O) fell 4.35 percent after its quarterly sales forecast fell short of Wall Street estimates, overshadowing its record sales and profit during the holiday season.
While fourth-quarter results have mostly beaten expectations, there have been 27 negative earnings preannouncements issued by companies in the S&P 500 index, compared with nine positive, data from Refinitiv shows.
The negative to positive ratio is now 3.0, which is above the long-term average of 2.7 and above the prior four-quarter average of 1.5, Refinitiv said.
The data suggests slower U.S. growth and adds to a growing list of economic readings indicating slowing global growth. The Caixin/Markit index of Chinese manufacturing fell to its lowest since February 2016 CNPMIC=ECI.
Oil prices rose, lifted by signs the United States and China could soon settle their protracted trade dispute, while producer cuts and U.S. sanctions on Venezuelan exports helped tighten supply.
International Brent crude oil futures LCOc1 rose $1.18 to $62.02 per barrel. U.S. West Texas Intermediate (WTI) futures CLc1 added 96 cents to $54.75.
“The big news of the week is the tone of the Fed has turned a bit dovish. The outlook for a tightening phase has come to an end,” said Ming Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California.
Reporting by Herbert Lash; additional reporting by Richard Leong; Editing by Dan Grebler