If you want some free trading education on how equities can be pushed higher by news that bolsters the sentiment of market participants, the combination of strong jobs data and U.S. stocks surging to new record levels on May 3 is a perfect example.
During this trading session, the Dow Jones Industrial Average had very strong performance, rising above 15,000 for the first time in history, according to Bloomberg. In addition, the blue-chip S&P 500 Index also had a great day, moving past 1,600 for the first time ever. This group of stocks appreciated to as high as 1,617 during the day.
At 8:30 a.m., The U.S. Labor Department released its April jobs report, which indicated that the nation's employers added a net 165,000 employees during the month, which is a figure that surpassed the predictions of economists, The Associated Press reports.
The jobs data provided by the U.S. Department of Labor surpassed the median forecast of economist participating in a Bloomberg poll, which called for an increase of 140,000 positions. In addition, the government agency provided an upward revision for the figures released in both March and February, and added 114,000 to the number of jobs created.
In addition to the strong improvement in the labor market, the unemployment rate fell to 7.5 percent, which was the lowest for this measure in four years. Upon receiving this news, market participants responded by pushing stock market futures sharply higher, according to The Associated Press.
"We're breaking through psychological barriers and that will continue to bring investors off the sidelines," Darrell Cronk, regional chief investment officer for Wells Fargo Private Bank, told the news source. He described the jobs report as being "wonderful."
He also emphasized his enthusiasm when speaking with Bloomberg, stating that "the data is strong enough to confirm that the expansion is intact, and the bones of this recovery are where they need to be."
Additional data that points to the optimism that exists in the market is the Chicago Board Options Exchange Volatility Index, which plunged 4.7 percent to reach a reading of 12.95 on May 3, as market participants reduced their hedges against potential price declines in the benchmark S&P 500 Index, according to the news source. So far in 2013, this widely-used measure of investor fear has plunged 28 percent.
Earnings and their impact
One factor that has generated substantial visibility is corporate earnings, which have indicated tepid revenue growth and strong increases in earnings, The Associated Press reports. In addition, many market participants are worried that these profits could be impacted as economic growth slows down in the U.S. amid fiscal headwinds, including the spending cuts and recent tax increases.
Data compiled by Bloomberg indicated that while the earnings of the 404 S&P 500-listed companies that have provided financial figures for the first fiscal quarter of 2013 have risen 2 percent, and 73 percent of these firms reported metrics that surpassed analyst forecasts, the sales of these blue-chip corporations did not fare as well, as 53 percent fell short of the predictions provided by market experts.
"Nobody has been happy with top line growth for a while," James Kee, president at San Antonio-based South Texas Money Management, told the news source a phone interview. "What we've seen on the top line is pretty consistent with what we've seen in the underlying economy, that is low, but positive private sector growth."
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