U.S. Stock Markets Rally as Unemployment Rate Decline to 7%

The stock markets in the United States soared and wiped out losses over the past few days after the Department of Labor reported that the unemployment rate in the country declined from 7.2% to 7% in November.

The Dow Jones Industrial Average (DJIA) climbed 1.26% t0 16,020.20 points, S&P 500 went up 1.12% to 1,805.03 points, and Nasdaq rose 0.73% to 4,062.52 points after the market close on Friday.

Employment data

Data from the Bureau of Labor Statistics showed that the economy added the economy added 203,000 jobs last month. According to the agency, the number of the people on temporary layoff dropped by 377,000 ad federal employees furloughed in October due to the partial government shutdown returned to work.

Over the past 12 months, the average jobs growth was 195,000. Last month, the transportation and warehousing industry added 31,000 jobs, health care sector created 28,000 new positions, and the manufacturing industry employed additional 27,000 workers. The employments in the professional and business services sector increased by 35,000, leisure and hospitality went up by 18,000, and construction industry hired additional 17,000 workers.

The agency also reported that the average hourly wage increased by $0.4 to $24.15 for all employees on private non-farm payrolls.


A related report from Reuters quoted the comments of investors/financial strategists regarding the jobs growth including Michael Woolfolk, senior currency strategist at the Bank of New York Mellon Corporation (NYSE:BK) and Stephen Cucchiaro, chief investment officer at Windhaven Investment Management.

Woolfolk said, “We feel this is consistent with material improvement as regards unemployment, however, we’ve seen no improvement yet in participation. The nonfarm payrolls number is probably not enough to persuade the Fed to taper in December. We still think the earliest they move is March…”

On the other hand, Cucchiaro said, “The stronger-than-expected employment report could increase speculation that the Federal Reserve will taper earlier than expected, perhaps as early as their next meeting on December 17-18 – which is why the markets have been correcting in the last few days. However, the Fed could point to falling inflationary expectations and increased fiscal uncertainty given the continued government gridlock as reasons to delay tapering. Because the market is pricing in some probability of a December taper, a taper delay could spark a year-end rally in stocks. We are still overweighting U.S. equities.”

Meanwhile, Sanjeev Agrawal, CEO and co-founder of Collegefeed and former product marketing head at Google Inc (NASDAQ:GOOG) opined, “Overall job growth may be improving, but for some groups like recent college graduates the situation is grim. Nearly 50 percent of new grads are ‘underemployed,’ working a full or part-time job that doesn’t require a four-year degree.”

Market movers

The stock price of General Motors Company (NYSE:GM) gained 2.76% to $40.17 per share driven positive reports. Yesterday, Kyle Bass of Hayman Capital Management revealed that his hedge fund acquired a stake in the automaker. Bass believed that GM is undervalued and it is poised to capture more market share from its rivals in the industry. He also said that the GM will become more competitive following the exit of the U.S. government from its stockholdings in the company.

JC Penney Company Inc (NYSE:JCP) decline more than 8% to $8.08 per share after the company revealed that the Securities and Exchange Commission (SEC) is investigating its $800 million stock offering in September. Prior to that, the stock was hit by the report that Kyle Bass sold out its stake in the struggling department store chain. The stock price of the company fell 17% this week.

The stock value of Intel Corporation (NASDAQ:INTC) increased more than 2% to $24.81 per share after Citigroup analyst Glen Yeaung raised his rating for the stock from neutral to buy with as $28 price target. According to him, the company will benefit from the stabilization of the corporate PC Market.

On the other hand, the shares of Ulta Salon, Cosmetics & Fragrance Inc. (NASDAQ:ULTA) plummeted 20.54% to $93.76 a share after reporting financial results that missed the expectations of Wall Street analysts. The company delivered $0.70 earnings per share, lower than the $0.74 average estimate of analysts.