Stocks Rally to Cap Tumultuous Week
Shares of online used-car seller Carvana surged after it posted results. Photo: Brandon Bell/Getty Images By Jack Pitcher May 5, 2023 5:09 pm ET Stocks ripped higher Friday on the back of an upbeat jobs report, capping a tumultuous week that saw regional bank stocks buckle even after JPMorgan Chase swooped in to buy failing First Republic Bank and the Federal Reserve chairman said the banking system was sound. Risk appetite returned after , the largest U.S. company by market value, reported first-quarter results that exceeded analyst expectations after the closing bell Thursday. Apple shares rallied 4.7%, helping to snap the S&P 500’s four-day losing streak. The S&P 500 closed up 1.8%. The Dow Jones Industrial Average rallied
Shares of online used-car seller Carvana surged after it posted results.
Photo: Brandon Bell/Getty Images
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Stocks ripped higher Friday on the back of an upbeat jobs report, capping a tumultuous week that saw regional bank stocks buckle even after JPMorgan Chase swooped in to buy failing First Republic Bank and the Federal Reserve chairman said the banking system was sound.
Risk appetite returned after , the largest U.S. company by market value, reported first-quarter results that exceeded analyst expectations after the closing bell Thursday. Apple shares rallied 4.7%, helping to snap the S&P 500’s four-day losing streak.
The S&P 500 closed up 1.8%. The Dow Jones Industrial Average rallied 546.64 points, or 1.7%, while the tech-heavy Nasdaq Composite rose 2.2%.
Bond yields rose following the payrolls report, which showed the U.S. added 253,000 jobs in April—well above the 180,000 that economists had forecast. The unemployment rate fell to 3.4%, matching the lowest reading since 1969. Job growth figures for February and March were revised lower.
As analysts continue to debate whether a strong economy, which could keep fueling inflation, is good or bad for stocks, investors on Friday appeared to take the jobs report as positive news that no recession is imminent.
“The payrolls number does justify a bit of a rally,” said Steve Sosnick, chief strategist at Interactive Brokers. “If it doesn’t take recession off the table, it certainly pushes it back.
Regional bank fears also appeared to ease Friday after an ugly selloff earlier in the week.
Bankers and government officials hoped the sale of First Republic Bank on Monday would draw a line under turmoil after several banks collapsed. But investors continued to hunt for weak links, dumping shares of midsize and smaller banks for much of the week.
Shares of PacWest and Western Alliance, the latest regional lenders to come under pressure, regained some ground, both closing more than 49% higher Friday. Both lenders were still down on the week. Zions Bancorp
Investors have been left to grapple with mixed signals, as corporate earnings and the economy have held up but extreme volatility in regional bank stocks sparked worries about financial contagion.
“Jobs are still hanging in there after many months of impressive strength,” said Rick Rieder, BlackRock’s chief investment officer of global fixed income. “We will see over the coming weeks whether the markets feel comforted by that, or whether they want to continue to climb the wall of worry alongside the other risks to the economy and investment landscape.”
A number of companies posted strong earnings results on Thursday and Friday. Apple reported a surge in iPhone sales, powered by growth in emerging markets such as India. Online used-car seller , cryptocurrency exchange Coinbase and sports-betting platform DraftKings all surged after posting results, up 24%, 18% and 15%, respectively. Concert promoter and operator Live Nation Entertainment rallied 15% after telling investors that its higher-than-expected first-quarter revenue reflected “incredible” demand for live concerts.
On the other end of the spectrum,
The positive mood Friday was a marked turnaround from earlier in the week, when investors were focused on the collapse of First Republic—the largest U.S. bank to fail since 2008—and the latest Fed policy meeting.
Fed chair Jerome Powell didn’t rule out future rate increases to fight inflation during his press conference Wednesday after the Fed again raised its policy rate by a quarter-percentage point. The Fed is widely expected to pause its rate increases at its next meeting. Investors have become increasingly unsettled about the impact of rapid rate hikes on the banking system.
The 2-year Treasury yield climbed to 3.920% from 3.727% after the jobs report raised the specter of further tightening. Still, the yield remained below Monday’s level, and interest-rate derivatives suggest traders expect to see rate cuts later this year.
“This is just one data point, and a heavily revised one at that, that will aggregate into a larger picture by the time the next Fed meeting rolls around,” said Jason Pride, chief of investment strategy and research at Glenmede.
The jobs report helped push up the price of benchmark U.S. crude, following a three-week selloff driven by a gloomy economic outlook. WTI crude oil was up 3.9%.
Gold rose 1.4% on the week to close at $2,017.40 per troy ounce, close to a record high.
Overseas, the Stoxx Europe 600 Index fell 0.3% for the week. The Japanese Nikkei index rose 1% this week, while the Shanghai Composite Index added 0.3%.
Write to Jack Pitcher at [email protected]
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