Dow ends up 3.3% as US stocks rally on jobs data, dovish Fed

Traders work on the floor of the New York Stock Exchange on Jan 3, 2019.
Traders work on the floor of the New York Stock Exchange on Jan 3, 2019.PHOTO: AFP

NEW YORK (AFP) - Wall Street stocks surged higher on Friday (Jan 4) to finish a volatile week on an upbeat note following dovish Federal Reserve comments and a strong US jobs report.

The Dow Jones Industrial Average climbed 3.3 per cent, or nearly 750 points, to end the week at 23,433.16.

The broad-based S&P 500 jumped 3.4 per cent to 2,531.95, while the tech-rich Nasdaq Composite Index advanced 4.3 per cent to 6,738.86.

The rally more than made up for blistering losses on Thursday, when the Dow shed 2.8 per cent after Apple slashed its revenue forecast on weak demand in China and a US report showed manufacturing activity slumping to a two-year low.

On Friday, the Labour Department reported the US added 312,000 jobs in December, much above analyst expectations. The figures strengthened the case of those who have argued that markets have overreacted to signs that US growth may have peaked.

Stocks rallied further after Fed Chair Jerome Powell told a gathering of economists that the US central bank had no "pre-set" plan for interest rates and was carefully monitoring economic conditions.

"Markets are expressing concerns about global growth in particular and trade negotiations," Powell said.

"We're listening with - sensitively to the message that markets are sending and we'll be taking those downside risks into account as we make policy going forward."

Powell's remarks reassured investors who have worried the Fed might raise rates excessively, but Jason Schenker of Prestige Economics suggested the Fed could.

"Despite this dovish tone, we are sceptical," Schenker said in a note. "The Fed has willfully ignored trade and interest rate risks while talking a hawkish game."

Many analysts are girding for a rocky year for markets, owing to the US-China trade war and other unresolved matters, including a government shutdown fight in Washington that President Donald Trump warned Friday could last years as he battles for funding for a border wall with Mexico.

Stocks could be further pressured when companies report quarterly earnings later this month, according to DataTrek Research Co-Founder Nicholas Colas.

"The upcoming earnings season will likely see managements reset 2019 earnings expectations to something close to flat versus 2018," said Colas in note on Friday, adding that stocks could push higher in the year even if January is a month of losses.