U.S. stocks gained on the last day of the week ended May 8, despite the gloomy nonfarm employment result received for the month of April. More than 20 million people lost jobs in the United States due to the coronavirus in April, pushing up the unemployment rate to 14.7%, a level last seen during the Great Depression.
However, major bourses remained unaffected by the dreary jobs report since the market now expects a sharp but short recession. Moreover, there are tell-tale signs that the outbreak has peaked and a coronavirus vaccine is much in the cards.
Finally, U.S.-China trade negotiators spoke on the phone on May 7, which induced optimism in the markets over the phase one trade deal between the two countries.
The three major indices — the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite — closed in the green on Friday.The Dow Jones Industrial Average closed at 24,331.32 after rising 1.9%, the broader S&P 500 reached 2,929.80 after gaining 1.7% and the tech-laden Nasdaq Composite hit 9,121.32 after increasing 1.6%.
The fear-gauge CBOE Volatility Index (VIX) rose 7.5% to close at 30.07 on May 8. Finally, advancers outnumbered decliners on the NYSE by a 4.68-to-1ratio.
Record Number of Jobs Lost in April
Nonfarm employment for the month of April fell drastically, with as many as 20.5 million jobs lost, the U.S. Bureau of Labor Statistics reported on May 8. The sharp decline in employment is reflective of the coronavirus pandemic and its effect on businesses in the country while efforts are being made to reduce the number of infections.
Job losses occurred across all industry sectors of the economy, with theleisure and hospitality industry being hit hardest. Last month, the number of persons who were jobless for less than 5 weeks rose by 10.7 million to reach 14.3 million, accounting for almost 70% of the unemployed. Total employment fell by 22.4 million to 133.4 million.
The leisure and hospitality industry lost 7.7 million workers and education and health services lost 2.5 million jobs. Both professional and business services and retail industries lost 2.1 million jobs. Manufacturing and other services lost 1.1 million jobs while government employment fell by 980,000. Construction industry dropped 975,000 and transportation and warehousing shed 584,000 jobs.
U.S.-China Trade Negotiators Agree on Groundwork for Trade Deal
U.S. Treasury Secretary Steven Mnuchin, U.S. trade negotiator Robert Lighthizer and his Chinese counterpart Liu He spoke over the phone on May 7. The trade negotiators decided to create a constructive environment for the trade deal to be implemented.
Both countries agreed upon creating the right economic and public-health cooperation so the trade deal can be put to work smoothly, which was signed in January this year. The negotiators also decided to keep close communications. The phone call was made after President Donald Trump blamed China for not handling the coronavirus pandemic properly and threatened to drop the bilateral trade pact.
The three major indexes rose in the week ended May 8, as investors drew confidence from an array of events that took place during the week. The Dow Jones Industrial Average rose 2.5%, the S&P 500 index gained 3.4% and the Nasdaq Composite increased 6% last week. Investors remained focused on the possibility of the phase one trade deal between the United States and China be put in place and the probability of jobs lost in April be refilled soon as the country’s economy gradually gathered steam.
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