Stocks Soar as Weak Job Market Sparks Rate Cut Dreams

Stocks Soar on Dreams of Rate Cuts as Job Market Suddenly Looks Weak U.S. stocks rose for a seventh straight day on Thursday, with the Dow Jones rising more than 300 points, to close at its highest since early April. The winning streak is the longest since December.

Even if the recovery isn’t exactly thriving, investor optimism was given some support by the hope that we might be on the downside of the inflation curve, meaning that the Federal Reserve might get ready to cut interest rates. As it turned out, this week’s economic reports did not shed much light, although an uptick in the number of people claiming jobless benefits could be viewed as good news for inflation control. Yields on bonds also pulled back a bit, as the market seemed to believe that it might be getting ready for a Fed rate cut.

Earnings reports also remained potent catalysts of key stock prices. Equinix rose after its results; so did the many other REIT types and technology and internet stocks that largely exhibited decent but not spectacular results. Airbnb and Arm Holdings plunged after positive quarterly results were countered by reassurances by both companies that the exciting times might be back next year.

Rally not so sector-blind The gain on the broad market was skewed towards real estate, where Equinix’s surge simply towered over every other real estate move: Equinix alone made up 100 basis points of the 3.2 percent gain on the sector (which was itself 200 basis points shy of the punch to the Netflix tape, seen to the right). The story was similar for technology and consumer discretionary – but in each of these sectors, the gainers were concentrated among the best performers so far this year. Lower interest rates generally help stocks, by making it cheaper for companies to borrow money and luring investors from bond funds.

But the market is still down from its all-time highs. After setting new records in March, the Dow has sunk some 400 points.