Daily Management Review

Stronger Than Expected U.S. Jobs Data Pushes Dow Jones To Close Over 25,000 Point For The First Time Ever


01/05/2018




Stronger Than Expected U.S. Jobs Data Pushes Dow Jones To Close Over 25,000 Point For The First Time Ever
The release of strong employment data from the U.S. saw the Dow Jones Industrial Average surpassing the significant 25,000 milestone for the first time ever.
 
According to the National Employment Report released by ADP Research Institute, about 250,000 jobs were added into the private sector in the U.S. – much more than the expected market consensus of 190,000 jobs.
 
The ADP data is widely regarded to be a pre-indicator for the non-farm jobs and the stronger than expected data on this front obviously enhanced investor euphoria.
 
New closing records were set by all three major indexes on Thursday. 7,077.91 was the closing figure for the Nasdaq Composite Index which raised by 12.38 points, or 0.18 percent. 10.93 points were added to the S&P 500 to touch a closing value of 2,723.99. 25,075.13 was the closing value of the Dow Jones Industrial Average which saw a rise of 152.45 points, or 0.61 percent.
 
"Positive global economic releases have propelled equity markets higher thus far in 2018 just as they did in 2017," Brendan Ahern, chief investment officer of the U.S. Krane Funds Advisors, said. 
 
There was rise of 19.4 percent, 25.1 percent and 28.2 percent in the overall value of the Dow, the S&P 500 and the Nasdaq respectively which is indicative of the exponential increase in the U.S. stocks in 2017. The best annual gains since 2013 was seen by all the three major indices.
 
"U.S. equity markets have risen due to the country's positive payrolls and manufacturing data in addition to benefits from corporate and individual tax reform," said Ahern.
 
However, question about the risks associated with the equities and whether the rally in the U.S. stocks could last for a long time were being raised by some critics and investors.
 
There would be contemplation of the peaking of the rate of change on growth and the worsening financial conditions by the market and this is the basis that a much narrower performance for U.S. equities is expected by Morgan Stanley for 2018. Bigger drawdowns and more volatility is also expected in 2018 by the investment bank.
 
But the U.S. dollar's continued weakness is indicative of the subsidence of worries of higher U.S. interest rates, according to Ahern. Higher rates would act as headwinds for equities and their high valuations.
 
"Investors appear to have discounted the probability of the Federal Reserve delivering multiple interest rate hikes in 2018 which makes U.S. equities appear attractive to U.S. fixed income investments," he said.
 
There was division among Fed officials about the speed of rate hikes in 2018 which was revealed in the minutes of the latest meeting of the agency on monetary policy.
 
"Most participants reiterated their support for continuing a gradual approach to raising the target range, noting that this approach helped to balance risks to the outlook for economic activity and inflation," said the minutes of the Fed's December meeting.
 
(Source:xinhuanet.com)






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