Wall Street Sets New Records After Strong October Jobs Report

Investors reacted positively to the October jobs report, which indicated a better-than-expected pick-up in payroll growth and another drop in the unemployment rate. Stocks jumped on Friday, with major benchmarks rallying to new highs.

Following the release of the data, the blue-chip index reached a new intraday high, extending Thursday's advances and setting a seventh consecutive record closing high. The S&P 500 gained approximately 2% for the week, extending its winning run to five weeks for the first time since August 2020. The Nasdaq surged to a new high in response to the wide rally in tech stocks, and the Dow closed at a new high as well.

The Labor Department's October jobs data, which revealed that non-farm payrolls climbed by 531,000 last month, compared to the 450,000 predicted, was the focus of Wall Street on Friday. Both August and September payrolls were also revised upwards.

Unemployment fell to 4.6 percent, the lowest level since March 2020. In addition, average hourly pay increased by 4.9 percent year over year, as employers battled for workers amid severe labor shortages.

The October report suggested that the negative effects of the Delta type wave in late summer were starting to fade, especially given the increase in hiring in the leisure and hospitality industry and other high-contact industries.

Importantly for investors, the labor market data backed with the Federal Reserve's recent decision to reduce some of its monetary policy stimulus as the economy continues to improve.

The central bank chose to announce the start of its asset-purchase tapering program earlier this week but failed to provide details on the dollar amount of additional reduction planned for next year or the timing of interest rate hikes. The Fed stated that it would be contingent on how the economic recovery progressed. Powell did say, though, in his post-FOMC press conference on Wednesday that "there is more ground to cover to reach maximum employment both in terms of employment and participation."

"The labor market is still recovering. Today's report is really encouraging. I believe Goldilocks is correct: neither too hot nor too cold. "It won't impact the Fed's plan here as far as tapering and rising rates starting in mid-2022," Emily Roland, John Hancock Investment Management co-chief investment strategist, said.

Meanwhile, investors were keeping an eye on the latest earnings reports from a number of carefully watched corporations. Peloton saw its stock drop after the at-home exercise equipment firm issued a dismal estimate for the current quarter and lowered its full-year guidance, implying that growth may slow further after a rise in demand for home training gear in 2020. Uber also provided adjusted income guidance that fell short of Wall Street's expectations, despite the ride-hailing company's first-ever adjusted profit in the most recent quarter. After rival ad-driven media platforms such as Snap disappointed the Street with results and outlook, traders looked past Pinterest's declining user count to focus on the company's estimates-topping third-quarter earnings and profit, which came in better than expected.