U.S. stocks surged Friday as investors reacted to a stronger-than-expected reading on February job creation that was paired with slowing wage growth, a figure that likely cements the U.S. economic growth story but won't change the Federal Reserve's path on interest rates.
U.S. employers created 313,000 jobs last month, the Commerce Department said, much higher than the 200,000 figure anticipated by economists and the revised 239,000 figure for January. Average hourly earnings, however, slowed to 0.1% on the month and 2.6% on the year, suggesting that wage gains won't feed into headline inflation.
The Dow Jones Industrial Average rose 160 points in the opening 30 minutes of trading, taking the one week gain past 2.12% while those linked to the broader S&P 500 gained 17.5 points as investors extended gains from Asia trading a global sentiment boost that followed news of a potential summit between the U.S. and North Korea that could significantly reduced tensions in the region.
"For investors, it seems that with every positive economic step forward, there are just as many uncertainties to provide enough market pushback to make things interesting," said Mike Loewengart, VP, Investment Strategy at E*Trade. "With geopolitical tensions rising and as greater light is shed on the impact of the trade announcement, we could be in for a bumpy ride."
Benchmark 10-year U.S. Treasury note yields edged around 1 basis point higher to 2.90% while the dollar index, which gauges the greenback against a basket of six global currencies, gained 0.15% to 90.28.
"Slower wage growth is helping markets breathe a sigh of relief as inflation fears had been driving stock volatility amid rising Inflation and interest rates," said Alec Young, FTSE Russell's managing director of global markets research." "In addition, the fact that the economy added a strong 313,000 jobs in February versus only 239,000 in January is also boosting investor sentiment as they infer continued robust revenue and earnings growth."
"Overall the February jobs report is the best of both worlds - strong job growth without accelerating wage inflation - It's not too hot not too cold, a Goldilocks report," Young added.
Trump's unprecedented meeting with Kim Jong Un, brokered by South Korean President Moon Jae-in, could accelerate North Korea's intention to give up its nuclear weapons in face of harsh economic sanctions and remove the region's key geo-political risk if the summit proves successful.
Kim Jong Un talked about denuclearization with the South Korean Representatives, not just a freeze. Also, no missile testing by North Korea during this period of time. Great progress being made but sanctions will remain until an agreement is reached. Meeting being planned!
- Donald J. Trump (@realDonaldTrump)March 9, 2018The detente helped lift the MSCI Asia ex-Japan index 0.63% into the close of trading, while Japan's Nikkei 225 advanced 0.47%, as investors balanced the prospects of the meeting against Trump's decision last night to formalise stiff tariffs on steel and aluminium imports from most of it trading partners.
However, Trump's move on trade increased investor concern of reciprocation from officials in Europe and Asia, both of which have warned they would react in kind if Trump were to stick to his plans for a 25% tariff on imported steel and a 10% levy on non-American aluminium.
That's kept European markets in a cautious mood this morning, with the Stoxx 600 benchmark rising just 0.01% to 376.66 points ahead the jobs report before it jumped to a 0.55% gain that took the broadest measure of regional shares to 378.11 points.
Global oil prices were also supported by news of the talks, with Brent crude futures for May delivery marked 36 cents higher from their Thursday close in New York to $64.36 per barrel while WTI contracts for April gained 75 cents a barrel to $60.71.