In a whiplash-inducing turn, the stock market sprinted higher on Friday, shaking off a bout of intense selling after an unexpectedly robust jobs report calmed fears about an imminent economic collapse.
The S&P 500 jumped 1.7%, recouping nearly all of the prior day’s steep losses. The Nasdaq composite, home to many beaten-down technology stocks, led the way with a 2.1% surge. The Dow Jones industrial average wasn’t far behind, tacking on 1.3%.
The sweeping rally, which gathered strength throughout the morning, amounted to a jarring reversal from the gripping angst that had gripped Wall Street just 24 hours earlier. On Thursday, stocks had plunged as tensions flared in the Middle East and a chorus of Federal Reserve officials cooled hopes for any pause in interest rate hikes.
But those anxieties abruptly gave way on Friday to unbridled optimism after the government reported that U.S. employers had added a stunning 303,000 jobs in March — roughly double what forecasters had predicted. The unemployment rate also unexpectedly slid to 3.8%.
“It was a shockingly strong number that took the market’s biggest fear off the table,” said Liz Young, head of investment strategy at SoFi. “Investors no longer have to worry that the economy is careening toward an immediate recession.”
The jobs data provided a rare upbeat signal at a time when darkening clouds have gathered over the economic outlook. Blistering inflation, aggressive Fed rate increases, rising geopolitical risks and a banking crisis had fueled speculation that a severe downturn could be looming.
Instead, March’s hiring blowout indicated the job market remains extremely tight and the broader economy far more resilient than many had started to expect based on the market’s recent behavior.
“This validates the Fed’s stance that the labor market still has significant momentum,” said Ron Temple, head of portfolio management at Lazard Asset Management. “While recession risks remain, today’s numbers suggest it won’t be soon or as severe as feared.”
Still, the way stocks abruptly flipped from plunging to soaring reflected the underlying trepidation coursing through markets. Investors have become increasingly unnerved by the warring economic signals and unpredictable impacts of the Fed’s rate-hiking campaign.
With wage growth also matching forecasts, Friday’s rally suggested some traders were reassured that inflationary pressures could moderate without the need for excessive Fed tightening. But volatility seems certain to persist as Wall Street sorts through the mixed data in the months ahead.
