Stocks soar on jobs report, U.S.-China trade talks and Jerome Powell comments

Stocks soared Friday on Wall Street, reversing the big losses they suffered the day before. The major U.S. indexes all jumped more than 3%, the latest twist in a wild three months for markets.

Hopes for progress in the U.S.-China trade dispute, a strong report on the U.S. jobs market and encouraging comments from the head of the Federal Reserve about the central bank’s interest rate policy all combined to cheer investors.

China’s Commerce Ministry said trade talks will be held Monday and Tuesday in Beijing, and investors will again look for signs the world’s largest economic powers are resolving their dispute. The tension has dragged on for nearly a year, slowing business and dragging down stock indexes worldwide.

Meanwhile the Labor Department said U.S. employers added 312,000 jobs last month, a far stronger result than experts expected. U.S. stocks have tumbled since October as investors worried that the nation’s economy might slow down dramatically because of challenges including the U.S.-China trade war and rising interest rates.

The stock market’s plunge also threatened to shake up businesses’ and consumers’ confidence and spending plans. Some analysts said investors were acting as if a recession were on the horizon, despite a lack of evidence that the U.S. economy is struggling.

“It’s hard to square recession worries with the strongest job growth we’ve seen in years,” said Alec Young, managing director of global markets research for FTSE Russell.

Stocks rose even further after Federal Reserve Chairman Jerome H. Powell said the central bank will be flexible in deciding if and when it raises interest rates. He added that the Fed is open to making changes in the way it shrinks its giant portfolio of bonds, which affects rates on long-term loans such as mortgages.

Until recently, the Fed had suggested it planned to raise short-term interest rates three times this year and next, and Powell said the Fed’s balance sheet was shrinking “on autopilot.” Wall Street feared that the Fed might be moving too fast in raising borrowing costs, said Phil Orlando, chief equity market strategist at Federated Investors.

The Fed’s interest rate and bond portfolio policies “were at the top of the list of things we were concerned about, which is why the statement Powell made today is so supportive of the market,” Orlando said. “The Fed understands that what they attempted to communicate last month was inartful, that they didn’t get the right message across, and Powell tried to reset.”

The Standard & Poor’s 500 index climbed 84.05 points, or 3.4%, to 2,531.94 on Friday, more than wiping out its Thursday loss. The Dow Jones industrial average rose 3.3% to 23,433.16 after gaining 832 during the afternoon. The Nasdaq composite jumped 275.35 points, or 4.3%, to 6,738.86.

About 90% of the stocks on the New York Stock Exchange gained ground.

The biggest gainer in the S&P 500 was Mattel, which leaped 12.3% to $10.41.

Stocks sank Thursday after Apple said iPhone sales in China were falling, partly because of the trade war, and a survey suggested U.S. manufacturing grew at a weaker pace. Technology companies took their biggest losses in seven years.

The United States and China have raised tariffs on billions of dollars’ worth of each other’s goods in a fight over issues including Beijing’s technology policy. Last month, President Trump and Chinese leader Xi Jinping agreed to 90-day cease-fire as a step toward defusing tensions, but that failed to calm the stock market.

Technology, healthcare and industrial firms and banks made strong gains. Most of the companies in those industries stand to do better in times of faster economic growth.

Smaller and more U.S.-focused companies did even better than larger multinationals. The Russell 2000 index surged 49.92 points, or 3.8%, to 1,380.75. Smaller companies have fallen further than larger ones in the last few months as investors grew nervous about how the U.S. economy will perform this year and next.

Stocks have whipsawed between huge gains and losses for the last few weeks after their big December plunge. Katie Nixon, chief investment officer for Northern Trust Wealth Management, said investors will keep reacting to the economy’s health and to concerns about high levels of corporate debt as interest rates rise.

“We don’t expect that this will be the end to the volatility,” she said. “There’s mounting evidence we’re going to see a slowdown,” albeit not a severe one.

Bond prices fell sharply. The yield on the 10-year Treasury note rose to 2.66% after it plunged to 2.55% Thursday, which was its lowest in almost a year. That rise helps banks, as higher interest rates enable them to make bigger profits on mortgages and other loans.

European shares also overcome their Thursday losses, with Germany’s DAX gaining 3.4%, France’s CAC 40 rising 2.7% and Britain’s FTSE 100 advancing 2.2%.

In Asia, Hong Kong’s Hang Seng jumped 2.2%. South Korea’s Kospi added 0.8%. Japan’s Nikkei 225 index fell 2.3% on its first day of trading in 2019 as technology and electronics makers slumped on Apple’s report that Chinese iPhone sales were slipping.

U.S. benchmark crude oil rose 1.8% to $47.96 a barrel in New York. Brent crude, used to price international oils, climbed 2% to $57.06 a barrel in London.

Wholesale gasoline slipped 0.1% to $1.35 a gallon. Heating oil climbed 1.6% to $1.77 a gallon. Natural gas jumped 3.4% to $3.04 per 1,000 cubic feet.

Gold fell 0.7% to $1,285.80 an ounce. Silver slipped 0.1% to $15.79 an ounce. Copper rose 3.1% to $2.65 a pound.

The dollar strengthened to 108.51 yen from 107.77 yen. The euro rose to $1.14 from $1.1391. The British pound rose to $1.2740 from $1.2630.