The Dow gained more than 90 points, or 0.3% on Friday, while the S&P added 0.4% and the Nasdaq rose 0.6%.
The government said that 49,000 jobs were added in January following a revised loss of 227,000 jobs in December. Economists had forecast a jobs gain of 50,000 for January.
The unemployment rate fell to 6.3% from 6.7% a month earlier. But that’s still much higher than the 3.5% jobless rate a year ago before the Covid-19 pandemic sent the economy into recession.
Wages rose only modestly last month, which isn’t great news for American workers — but could be encouraging for investors. The slight wage gain suggests that inflation still isn’t a major economic threat, which likely means the Federal Reserve can hold interest rates near zero for a lot longer without having to worry that the economy will overheat.
For the week, the Dow gained nearly 4% — its best 5-day stretch since November. The S&P 500 and Nasdaq rose about 4.7% and 6% this week respectively.
The hopes for continued Fed stimulus, combined with expectations that consumer and business activity could soon resume to something closer to normal as more people receive coronavirus vaccines, has lifted the stock market for the past few months.
Growth forecasts for the economy may now need to “be frantically revised upward” according to Brian Nick, chief investment strategist at Nuveen.
Nick told CNN Business that current consensus forecasts of about 3.7% annualized gains for the gross domestic product in 2021 now “look absurdly low.”
“The recovery is going to be fantastic unless there is some sort of catastrophic failure with the vaccine,” Nick added.
Investors seem to agree with that bullish outlook.
Strong fourth quarter earnings have also helped boost investor sentiment. Ford, biotech company Gilead Sciences, social media firms Pinterest and Snap and video game maker Activision Blizzard all rose following solid results.
In fact, profits for S&P 500 firms are now up about 1.7% for the fourth quarter compared to a year ago, according to data from FactSet. It’s the first time that earnings have risen since the fourth quarter of 2019.
Big tech firms — the market’s beloved FAANG stocks as well as Microsoft and Tesla — have all posted healthy sales and profits as well. That’s led some experts to believe that growth stocks can continue to lead the market higher.
“Earnings have been good and the numbers from Apple and Microsoft have been stunning,” said Mark Stoeckle, CEO and senior portfolio manager of Adams Funds.
It should only get better. FactSet said that analysts are now forecasting that earnings for S&P 500 companies will jump 21% from a year ago in the first quarter and soar nearly 50% in the second quarter.
Shares of GameStop were up as well, although trading was volatile after Robinhood eased restrictions on buying it and other so-called meme stocks that have been boosted this year due to support from the Reddit WallStreetBets community. AMC, another Reddit favorite, was lower.