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U.S. Stock Futures Extend Gains After Jobs Report

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07/02/2020 | 08:56am EDT

By Caitlin Ostroff

U.S. stock futures extended their gains Thursday after the June employment report showed the economy gained more jobs than expected last month.

The U.S. gained 4.8 million jobs in June and the unemployment rate improved to 11.1%.

Economists surveyed by The Wall Street Journal expected employers added 2.9 million jobs in June, following May's payroll gain of 2.5 million, and an unemployment rate of 12.4%, down from 13.3% in May. Before the coronavirus drove the U.S. into a deep recession, the jobless rate was hovering around a 50-year low of 3.5%.

Futures tied to the S&P 500 rose 1.3%, suggesting stocks could rise after the New York opening bell, and had been up about 0.7% ahead of the report.

The index ticked up 0.5% on Wednesday after another key indicator showed that the nonfarm private sector created 2.4 million jobs in June.

Signs of the U.S. economy's revival have bolstered optimism among some investors that the damage caused by the coronavirus pandemic could be quickly erased. That, combined with speculation that the Federal Reserve and the government will continue funneling large amounts of money to American businesses and households, is propelling stocks higher.

"In my mind, this is the beginning of a new bull market," said Patrick Spencer, managing director of U.S. investment firm Baird. "Aggressive fiscal and monetary stimulus is going to continue and that's going to support the market, and recent economic data suggests a recovery is starting to emerge."

However, the survey data were largely collected in mid-June and won't reflect recent government-mandated business closures and related layoffs over the past two weeks as some states in the South and West reversed or paused reopening plans.

"Everybody is obviously watching the changes in the American labor market," said Florian Hense, an economist at Berenberg Bank. "The U.S. consumer is the most important driver of the global economy."

Weekly unemployment claims data, which offer a more up-to-date view on the U.S. labor market, showed the number of new applications for jobless benefits fell by 55,000 to 1.43 million last week.

The number of applications for jobless benefits filed every week has come down from a peak of nearly 7 million in late March, but has stabilized near a historically high 1.5 million, an indication that companies are continuing to cut jobs.

While economic data may continue to signal recovery in the short term, the revival is likely to slow, and even sputter, as businesses navigate their way through new or remaining restrictions on social and economic activity, investors said. American consumers could also continue to avoid restaurants and entertainment venues because of the infection risk or concerns about their paychecks even after state and local authorities ease restrictions, which would dampen the pace of the economic revival.

"There are huge questions over whether the recovery will continue at this pace over the coming months" on nonfarm payrolls, said Andrew Hunter, senior U.S. economist at Capital Economics. "Employment is pretty key for consumer spending."

The surge in coronavirus cases in some states prompted Apple to close 16 locations in Florida, Mississippi, Texas and Utah, with plans to shut down 30 more locations by Thursday. McDonald's is also pausing the reopening of dine-in service in the U.S.

Shares of Tesla rose 9.7% premarket after the electric car maker said Thursday it produced over 82,000 vehicles and delivered approximately 90,650 vehicles in the second quarter.

The pan-continental Stoxx Europe 600 gained 1.2%, while most major Asian equity benchmarks ended the day higher.

Hong Kong's Hang Seng Index closed up 2.9%, while the Shanghai Composite Index gained 2.1%.

In bond markets, the yield on the 10-year Treasury note rose to 0.701% from Wednesday's 0.682%. U.S. bond markets will close at 2 p.m. ET ahead of the Independence Day holiday.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
APPLE INC. 1.77% 460.04 Delayed Quote.53.94%
DJ INDUSTRIAL -0.29% 27896.72 Delayed Quote.-2.25%
HANG SENG -0.01% 25224.93 Real-time Quote.-10.52%
MCDONALD'S CORPORATION 0.23% 206.49 Delayed Quote.4.49%
NASDAQ 100 0.19% 11178.370244 Delayed Quote.27.76%
NASDAQ COMP. 0.27% 11042.504225 Delayed Quote.22.73%
S&P 500 -0.20% 3373.43 Delayed Quote.4.42%
S&P/CITIC 300 INDEX 0.20% 4046.74 Delayed Quote.13.46%
S&P/CITIC 50 INDEX 0.17% 3928.86 Delayed Quote.4.70%
SHANGHAI STOCK EXCHANGE B SHARES INDEX 0.69% 237.1882 Real-time Quote.-7.64%
STOXX EUROPE 600 -0.63% 372.53 Delayed Quote.-9.85%
STOXX EUROPE 600 NR -0.55% 817.78 Delayed Quote.-8.37%
TESLA, INC. 4.26% 1621 Delayed Quote.287.49%
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