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Dow soars 700 points as shock employment data shows economy roaring back to life

Stocks are rushing higher in early trading Friday after a stunningly good report on the U.S. job market gave Wall Street's recent rally another shot of adrenaline.

The Dow Jones Industrial Average was up 756 points, or 2.9 percent, at 27,037, as of 9.45am. The Nasdaq was up 1.6 percent and the S&P 500 was up 2.2 percent within the first 15 minutes of trading 

It came after the government said that U.S. employers added 2.5 million workers to their payrolls last month. Economists were expecting them instead to slash another 8 million jobs amid the ongoing fallout from the response to the coronavirus pandemic.

While economists cautioned that it's just one month of data and could be giving false hope, the report gives credence to the building optimism among stock investors that the economy can recover relatively quickly from its current hole. 

That hope has been a big reason for the better than 40 percent rally for the S&P 500 since late March.

Stocks soared on Friday on positive employment data. Pictured, representatives from Shift4 Payments ring the opening bell of the New York Stock Exchange

The S&P 500 is now down only about 6.3 percent from its record set in February after earlier being down nearly 34 percent.

'It looks like the healing process is underway in the jobs market and it looks like it´s happening sooner than expected,' said Todd Lowenstein, equity strategy executive of The Private Bank at Union Bank. 'It looks like the worst is behind us.'

In another show of increased confidence, the yield on the 10-year Treasury zoomed up to 0.90 percent from 0.82 percent late Thursday. 

This area of the market was much earlier than stocks to give warning about the coming economic devastation from the coronavirus outbreak. It had also been much slower to rise than stocks recently, but the 10-year yield is now close to its highest level since late March.

Stocks began their tremendous rally in late March after the Federal Reserve came to the rescue once again with promises of immense aid to keep markets running smoothly. 

Capitol Hill also agreed on unprecedented amounts of aid for the economy, which helped eliminate the worst-case scenario for many investors of a full-blown financial crisis.

The Labor Department's closely watched monthly employment report on Friday showed the jobless rate dropped to 13.3 percent last month from 14.7 percent in April. Nonfarm payrolls rose by 2.5 million jobs after a record plunge of 20.6 million in April

Nonfarm payrolls rose by 2.5 million jobs after a record plunge of 20.6 million in April. The number of unemployed Americans is now at 21 million, according to the monthly report

More recently, it's been hopes that growth can resume for the economy as states across the country and nations around the world relax lockdown restrictions meant to slow the spread of the virus. 

Even as horrific and historic data continued to come in on the job market and economy, stocks largely remained resilient in their climb.

If their optimism proves to be right, it wouldn't be the first time. During past recessions, stocks have historically hit their bottom and turned upward months before the economy has. That's because investors are setting stock prices now for where they see corporate profits heading months into the future.

Continuing a recent trend, investors on Friday continued to move out of stocks that had been earlier winners in the weak, stay-at-home economy and into companies that would benefit most from a growing economy.

Smaller stocks had the market´s biggest gains, as they typically do when expectations for the economy are rising. The Russell 2000 of small-cap stocks jumped 4 percent.

Among the biggest stocks, energy producers, banks and industrial companies were jumping to the biggest gains. Their profits tend to be very closely tied to the strength of the economy.

Travel-related companies were also strong, after their stocks got pummeled early in the outbreak on worries that no one would want to fly or go onto a cruise ship for a long time.

American Airlines Group jumped 29 percent, tacking even more gains onto its 41.1 percent surge a day before when it said it would fly more of its regular U.S. schedule in a bet that fliers will return to the skies.

American Airlines Group jumped 29 percent, tacking even more gains onto its 41.1 percent surge a day before when it said it would fly more of its regular U.S. schedule (file photo)

Norwegian Cruise Line rose 20.8 percent, and United Airlines jumped 21.6 percent.

Retailers and owners of shopping malls surged on hopes that people may also head back to enclosed stores. Kohl´s added 15.3 percent, and Simon Property Group rose 13.5 percent.

The stocks that had been the steadiest earlier this year when investors were searching for stay-at-home winners, meanwhile, were lagging the market.

Netflix, whose subscriber rolls swelled with people hunkering down at home, slipped 0.2 percent. 

Clorox, whose disinfecting wipes had been cleared off shelves, was down 2.5 percent, and Amazon slipped 0.3 percent.

Economists had been predicting that the Labor Department report on Friday would reveal the unemployment rate had increased to a record 20 percent and about eight million jobs had been lost.  

Instead, the Labor Department's closely watched monthly employment report showed the jobless rate dropped to 13.3 percent last month from 14.7 percent in April. 

That figure is still on par with what the US witnessed during the Great Depression of the 1930s. 

Nonfarm payrolls rose by 2.5 million jobs in May after a record plunge of 20.6 million in April, according to the report.   

The number of unemployed Americans is now at 21 million. 

President Donald Trump immediately took credit for the rise in jobs just moments after the report was released, tweeting: 'Really Big Jobs Report. Great going President Trump (kidding but true)!'

The overall job cuts have widened economic disparities that have disproportionately hurt minorities and lower-educated workers. 

Though the unemployment rate for white Americans was 12.4 percent in May, it was 17.6 percent for Hispanics and 16.8 percent for African-Americans. 

The latest figures are a surprisingly positive reading in the midst of a recession that has paralyzed the economy in the wake of the coronavirus pandemic.

The May job gain suggests that businesses have quickly been recalling workers as states have reopened their economies following weeks long lockdowns.

The industries to see the sharpest increases in employment in May were in leisure and hospitality, construction, education and heath services, and retail trade.  

'These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus pandemic and efforts to contain it,' the Labor Department said in a statement.  

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