By BLOOMBERG
The Standard & Poor’s 500 Index rose from a three-month low after China moved to restore calm to its sinking markets, while data showing US payrolls surged more than expected in December added to confidence the economy can weather slower global growth.
The S&P 500 added 0.7% to 1,956.25 at 9.32am in New York, after the gauge sank 2.4% on Thursday, its steepest decline in three months.
“The market was prepared to attempt to bounce after a very weak start to the year, and the jobs data adds validity to some early strength today,” said Michael James, managing director of equity trading at Wedbush Securities Inc in Los Angeles. “This is a sign that the US economy continues to be very strong and gives some justification for the Fed rate hike last month.”
A report today showed a 292,000 gain in jobs last month, exceeding the highest forecast in a Bloomberg survey, after a 252,000 increase in November that was stronger than previously estimated.
The jobless rate held at 5%, and wage growth rose less than forecast from a year earlier. Such job market durability indicates employers were sanguine about the economy’s prospects just before the recent rout in global financial markets.
Worries over contagion from China lessened on Friday after officials set a higher yuan reference rate, suspended a controversial circuit breaker system that had halted stock trading twice since it was implemented at the start of the week and directed state-controlled funds to buy local shares.
US equities dropped more than 2% yesterday, with China’s sinking yuan bolstering concern that weakness in the world’s second-largest economy will spread. American shares erased almost US$2 trillion (RM8.8 trillion) in value this week.
The S&P 500 has fallen 6.3% through Thursday since Fed raised interest rates last month for the first time in nearly a decade.
The central bank balked at boosting borrowing costs in September in part due to turbulence sparked by China’s August currency devaluation. The poor start to 2016 has left the benchmark index 8.8% below its all-time high set in May after coming within 1% of the record as recently as November.
Today’s data “is reflective of an underlying momentum that’s in fact accelerating, not decelerating”, said Dan Veru, who helps oversee US$3.7 billion as chief investment officer at Fort Lee, New Jersey-based Palisade Capital Management. “There is no wage inflation and there is no commodity inflation. When you have both of these factors, the Fed will be more motivated to hold off raising rates,” he said.
— By Joseph Ciolli & Lu Wang
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