NEW YORK — Stocks rushed higher Friday after a strong report on the U.S. job market suggested a recession may not be as close as Wall Street had feared.
The S&P 500 leaped 1.5% for the latest surge in a rally that’s vaulted it nearly 20% since mid-October. That put Wall Street’s main measure of health on the edge of entering what’s called a “bull market” despite a long list of challenges.
The Dow Jones Industrial Average rallied 701 points, or 2.1%, while the Nasdaq composite gained 1.1%.
A television displays market news on the floor at the New York Stock Exchange in New York on Friday, when stocks rushed higher after a strong jobs report.
They got a boost after a report showed employers unexpectedly accelerated their hiring last month. It’s the latest signal that the job market remains remarkably solid despite much higher interest rates, and it offers a hefty pillar of support for an economy that’s begun to slow.
Areas of the market that do best when the economy is healthy led a widespread rally, including stocks of industrial companies, energy producers and banks.
People are also reading…
Perhaps more importantly for markets, the Labor Department’s monthly jobs report also showed a slowdown in increases for workers’ pay even as hiring strengthened.
While that may discourage workers trying to keep up with prices at the register, investors believe slower wage gains will mean less upward pressure on inflation across the economy. That in turn could allow the Federal Reserve to take it easier on its hikes to interest rates meant to lower inflation.
Following the report, traders were largely expecting the Fed to hold interest rates steady at its next meeting in two weeks. A pause on rate hikes would offer some breathing room for an economy that’s already seen manufacturing contract sharply for months. Higher rates have also hurt many smaller and mid-sized banks.
Traders are increasingly expecting the Fed to follow up a June pause with a July hike to interest rates. That helped push Treasury yields higher.
The yield on the 10-year Treasury climbed to 3.69% from 3.60% late Thursday. The two-year Treasury yield, which moves more on expectations for Fed action, jumped to 4.50% from 4.34%.
Also helping to support Wall Street was the Senate giving final approval late Thursday to a deal that will allow the U.S. government to avoid a potentially disastrous default on its debt. The move was widely expected by investors, and the deal moves next to President Joe Biden for his signature.
A frenzy around AI has helped the S&P 500 climb to its highest levels since August. Outsized gains for Nvidia and a small group of other stocks have been the main reason the S&P 500 has gotten so close to escaping its bear market, which saw a drop of 25.4% in nine months from early January 2022 into October.
All told, the S&P 500 rose 61.35 Friday to 4,282.37. The Dow climbed 701.19 to 33,762.76, and the Nasdaq gained 139.78 to 13,240.77.
These 5 charts show the ups and downs of the US stock market over 10 years
These 5 charts show the ups and downs of the US stock market over 10 years
The U.S. stock market is a complicated beast, and with recent events like the COVID-19 pandemic, we’ve seen some volatility in the last few years. Stocks dipped quite a bit during the pandemic but have recovered since.
To get an idea of how the stock market has fared in the last 10 years, watch trends of major market indices—or certain groups of companies’ stocks that give a sample of how the entire market is performing. Perhaps the most well-known market index is the S&P 500, a group of the 500 largest companies on the U.S. stock market.
While the S&P 500 is widely regarded as the best indicator of how the stock market is faring, other market indices can give you a different view based on the type of companies they track. Dow Jones, for instance, follows 30 of the largest companies in the country from various industries. The NASDAQ includes all stocks on the NASDAQ market, largely comprised of tech companies.
By watching the performance of these and other market indices, investors can get a good idea of how the U.S. stock market as a whole has performed over time. Olive Invest examined historical equities data from S&P Dow Jones, NASDAQ, and other data sources to see how the stock market has fared over the last decade.
How stocks have performed over the last decade
This chart shows a significant increase in stock index values from the last decade, despite a brief drop in 2020 during the pandemic. At the start of the COVID-19 pandemic, there was a steep drop-off in index values. However, they bounced back by the end of 2020 into 2021.
Index values have held relatively steady growth across the last 10 years. The NASDAQ, S&P 500, and Dow Jones Industrial Average have all doubled in value since 2012.
Tracking volatility
This chart measures the Chicago Board Options Exchange volatility index (VIX index), designed to show how current events and uncertainty affect stock prices. Essentially, the more fluctuation you see here, the more uncertainty investors and the public have about the future, which can significantly impact the market and even help project market crises.
Unsurprisingly, the most significant spike in volatility from the last decade was in March 2020, at the beginning of the COVID-19 pandemic. The last two years have shown a reduction in volatility since this spike, but in general, there is more uncertainty than 10 years prior.
Rates of return since 2000
The S&P 500’s annual return on investment is a critical indicator of the stock market’s performance. The average return since the S&P 500’s establishment is 11%.
There are a few notable data points here—perhaps the most prominent of which is the Great Recession in 2008. That financial crisis resulted in the most significant drop in the S&P 500 return of the last 20 years. Since the recession, however, the rate of return has been above average almost every year.
S&P stocks by sector
The S&P 500 tracks the top 500 U.S. companies on the stock market. Knowing what types of businesses make up the majority of the index is essential to understanding which sectors have the most success.
In 2022, Information Technology made up 26.4% of the S&P 500—an industry high in the last 20 years. Similarly, health care is gaining ground in the previous few years, though it is still short of its historical high.
The financial sector has seen a downturn in the last decade—though this may change with the reclassification of major shares next year.
Number of publicly traded companies declines
In the last 20 years, there has been a significant drop in how many publicly traded domestic companies are on the U.S. stock market as more companies exit the market and there are fewer IPOs.
The last decade, however, has been far more stable. Experts suggest the change is connected to natural fluctuations and changing dynamics in the market’s major industries. McKinsey attributes a significant portion of the drop-off to acquisitions.
Still, there have been fewer IPOs in the last several years, which can be a disappointment for new investors trying to get in on the ground floor.
This story originally appeared on Olive Invest and was produced and distributed in partnership with Stacker Studio.
Recent Comments