Following a positive jobs report, the Dow Jones Industrial Average is up 157 points, or 1.05%, to 15,198 as of 1:25 p.m. EDT. The S&P 500 is up 0.92% to 1,637.
There were two U.S. economic releases today.
| Report | Period | Actual | Previous |
|---|---|---|---|
| Non-farm payrolls | May | 175,000 | 149,000 |
| Unemployment rate | May | 7.6% | 7.5% |
Investors were worried about the jobs report after Wednesday’s private-sector payrolls report disappointed and depressed Dow stocks. The government’s nonfarm payroll report showed that the economy added 175,000 jobs in May, beating expectations of 164,000 additional jobs.
US Change in Nonfarm Payrolls data by YCharts.
The jump in job creation was not enough to stop a rise in the unemployment rate to 7.6%, but that uptick was the result of more people entering the labor market. This is positive for the economy, as it means more people feel they can find a job. And a higher unemployment rate is good for asset prices, because it means the Fed will keep up its asset purchases. Currently, the Federal Reserve is buying $85 billion of long-term assets every month — $45 billion of long-term Treasuries and $40 billion of mortgage-backed securities. The Fed has said that it will continue the purchases until inflation rises above 2% or unemployment falls below 6.5%. Inflation is currently running around 1%, and expectations for inflation going forward, per the TIPS spread — the difference between the yields on Treasury Inflation Protection Securities and the nominal U.S. Treasury bond yield — is 2% for the next five years.
Today’s Dow leaders
American Express Company (NYSE:AXP) is among today’s Dow outperformers, up 2%. More employed Americans and more people looking for work should mean more spending going forward, which is a good trend for American Express Company (NYSE:AXP). American Express benefits doubly from the economy strengthening as it means less bad debt. Unlike Visa and Mastercard which only process transactions and rely on banks to lend credit, American Express Company (NYSE:AXP) lends its own money to its members. It therefore is incentivized to not only have customers make transactions but to make sure they can make good on those transactions.
Also flying high today is The Boeing Company (NYSE:BA), up 2.2%. Earlier today Boeing stock hit a 52-week high of $102.25. Boeing is up 30% since March, when it looked like the company had solved the issues with the batteries of its Dreamliner aircraft. If you recall, the Dreamliner was grounded in January by the FAA due to problems with its lithium battery. Now that the problem has been solved, The Boeing Company (NYSE:BA) can resume deliveries of the Dreamliner to. The Boeing Company (NYSE:BA) has also been making news on some other fronts. So far this month the company has won two contracts from the Pentagon that, while small, sow the seeds for potentially massive new opportunities in the future.
The article The 2 Stocks Leading the Dow’s Surge originally appeared on Fool.com.
Dan Dzombak can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak. He has no position in any stocks mentioned. The Motley Fool recommends American Express.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
