An example of how equities can perform well amid a lukewarm economy occurred on February 1, when the Dow Jones Industrial Average surpassed 14,000, as markets responded to a jobs report indicating that the nation created more than 150,000 positions.
The Labor Department report indicated that the nation's employers added 157,000 new positions in January, and the figures for the two prior months were revised higher. The latest data revealed that 196,000 positions were created in December, and 247,000 in November.
Additional information supported the perception that the labor market has been improving, and Bloomberg reports that the length of time that people need to find a job fell to a median of 16 weeks from 18 weeks the month before. Although 8.74 million jobs were lost during the recent economic downturn, 5.51 million were recovered.
The jobless rate climbed to 7.9 percent in January, which was higher than the median forecast of 7.8 percent predicted by economists taking part in a survey conducted by the media outlet. A similar poll conducted by the news source provided a median projection that the economy would create 165,000 new positions during the month.
Federal Reserve Bank of St. Louis President James Bullard said in an interview with the media outlet that the number of jobs created during the last three months is evidence that this prediction of more robust growth in 2013 is accurate.
The Dow experienced robust gains, rising 1.1 percent to reach 14,009.79 at the close of trading, according to Bloomberg. The blue-chip S&P 500 also had a strong trading session, gaining 1 percent to 1,513.17. The group of stocks has been logging back-to-back weekly improvements, rising for the last five weeks in a row. Investors trading volume was slightly more than usual, as these market participants traded 6.9 billion shares, which is 11 percent above the three-month average.
"The market is greeting the jobs numbers very happily," Wayne Wilbanks, chief investment officer at Norfolk, Virginia-based Wilbanks, Smith & Thomas Asset Management LLC, which has $2.3 billion under management, told the news source in a phone interview. "The U.S. economy continues to benefit from the two in particular very positive trends" that exist in the real estate and manufacturing sectors.
The news source notes that the S&P 500 is only 3.3 shy of the record it set in October 2007, when it rose to 1,565.15. The Dow is even closer to its highest point on record, which is 14,164.53.
Strong inflows of cash into equities has helped drive up the value of stocks, and corporate data released on January 31 reveals that investors put $12.7 billion into mutual funds that invest in U.S. stocks this last week, according to Reuters. This robust investment has resulted in the most robust four-week flow into these investments since 1996.
"There is a lot of money looking for a home, and people are finally deciding the bond market is done and moving money into equities," Edward Simmons, managing director and partner at Portland, Maine-based HighTower, told the news source. "I see the rotation (of assets) pushing the market up in the face of not-massive amounts of good news," he said.
He added that the higher risks associated with equities is not deterring investors.
This comes after the blue-chip S&P 500 surged 5.2 percent in January, Bloomberg reports. This performance was the most for this first month of the year since 1997. The sharp appreciation added more than $2 trillion to the value of stocks worldwide.
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