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Wall Street is happy with May jobs report

June 07, 2013|By Alana Semuels

NEW YORK -- Conventional wisdom said that good news in the jobs market would lead to bad news in the stock market Friday morning. Investors, seeing decent jobs data, would assume that the Federal Reserve would stop pumping money into the economy, and begin to sell off stocks, the theory went.

But little is predictable on Wall Street, and instead, investors turned a decent jobs number into a good run in the stock market, as traders pushed the Dow Jones Industrial Average up more than 100 points in the first 30 minutes of trading. As of 10:01 a.m., the Dow was up 119.91 points, or 0.80%, to 15,160.53. The S&P 500 was up 10.92 points, or 0.67%, to 1,633.85.

Employers added 175,000 jobs in May, the Bureau of Labor Statistics said Friday morning, more than the 169,000 analysts had expected. The unemployment rate ticked up slightly to 7.6% from 7.5% as more people entered the labor force to look for work, showing the unemployed might have some optimism about the economy.

Those numbers were not strong enough to signal that the Federal Reserve will definitely start tapering its stimulus of the economy, hence the early morning strength in the markets. Labor force participation is down, and unemployment is still relatively high. Inflation also hasn’t risen as much as the Fed expected. The Bureau of Labor Statistics said that employers had added fewer jobs in March and April than previously thought.

“The FOMC [Federal Open Market Committee] will remain cautious and not alter its program of asset purchase in the next two meetings (June and July),” wrote Tanweer Akram, a senior economist at ING Investment Management, in a note.
 
But investors might change their minds as the day goes on, especially after they listen to an interview that former Fed chairman Alan Greenspan gave before the job numbers were released, urging the Fed to begin tapering its stimulus now.

"The sooner we come to grips with this excessive level of assets on the balance sheet of the Federal Reserve—that everybody agrees is excessive—the better," he said in a "Squawk Box" interview on CNBC.

Other analysts agreed that they expect to see the Fed’s $85 billion a month bond-buying program end sooner, rather than later.

“From a policy perspective, the Fed may indeed keep up the taper talk not because the economy is booming but precisely because it isn’t,” wrote Steve Blitz, chief economist at ITG Investment Research. “The key is, from the FOMC perspective, that the economy is tilting towards growth rather than contraction.”

Shares of Walmart were up ahead of the company’s annual shareholder meeting; Procter and Gamble and Home Depot also benefited from optimistic traders in the first trades of the morning.

ALSO:

U.S. economy adds 175,000 jobs in May

Retail sales heat up in May amid warmer weather

Report: Walmart's low pay drives some employees onto public benefits

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