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The Dow Jones Industrial Average surged nearly 750 points Friday, more than erasing its losses one day earlier, as a stock market hungry for good news received two morsels: a stronger-than-expected jobs report and comments from the Federal Reserve Chairman that signaled more flexibility in raising interest rates.
The Dow rallied 3.3% to 24,433.16, with the S&P 500 Index rising 3.4% to 2,531.94. Technology stocks, which have been especially volatile in recent months, were among the biggest gaining. The Nasdaq Composite rose 4.3% to 6,738.86.
Apple’s stock rose 4.3% to $ 148.26 two days after the company warned that a slowdown in China and overall iPhone sales would cause its revenue in the holiday quarter to fall well short of analyst expectations. Before Friday, Apple had lost 39% of the peak value it reached in early October.
The tech sector was the best performing subset of the S&P 500, rising 4%. Many large-cap tech stocks rose even further, with Amazon gaining 5%, Microsoft rising 4.7%, Alphabet advancing 5.1% and Netflix surging 9.7%. Since a market selloff on Christmas Eve, Netflix has gained 27%.
Early Friday, the Labor Department said that U.S. employers added the most workers in 10 months as wage gains accelerated and labor-force participation jumped, suggesting the underlying economy is holding up amid falling stock prices.
Nonfarm payrolls rose by 312,000 in December, surpassing analyst forecasts. Average hourly earnings rose 3.2% year over year, the fastest pace since 2009. The unemployment rate inched up from a five-decade low to 3.9% as more people entered the labor market to find work.
The stock rally advanced further after Fed Chairman Jerome Powell indicated at a conference in Atlanta that the Fed may pause from raising interest rates in the coming months. “With the muted inflation readings that we’ve seen coming in, we will be patient as we watch to see how the economy evolves,” Powell said. The remarks were received as more dovish than some of Powell’s recent comments, which have drawn the ire of President Trump.
Both developments were welcome in a market that had been bracing for more bad news. Apple’s revenue revision had led investors to worry about more disappointing earnings later this month. A Thursday report also showed manufacturing activity was slowing faster than expected. But investors took the jobs report in particular as a sign that the economy is holding up.
“No matter what the Fed’s going to do this year, today’s number showed that even though the Fed may still raise rates once or twice this year, it showed that a recession is still not very likely this year,” said Matt Maley, an equity strategist at Miller Tabak & Co. “Recessionary fears were really starting to grow but today’s number eased those fears.”
(Reuters) – Shares in Apple Inc (AAPL.O) and its suppliers fell on Thursday after a raft of analysts read a prediction of softer smartphone sales from Taiwan Semiconductor Manufacturing Co Ltd (2330.TW) as driven chiefly by concern about demand for iPhones.
TSMC, the world’s largest contract chipmaker and a major Apple supplier, revised its full-year revenue target to the low end of its earlier forecast.
“Apple represents nearly 20 percent of TSMC’s revenue so the outlook potentially points to weaker-than-anticipated iPhone demand,” Atlantic Equities analyst James Cordwell told Reuters.
Others, some asking not to be quoted, said baldly that the warning was “exactly” about Apple.
Mizuho Securities USA said in a client note that its checks continue to point to soft demand for iPhone X, the Cupertino-based firm’s tenth anniversary phone released last November, in addition to a steady fall in iPhone 8 and 8 Plus orders.
Apple’s shares were last down 2.5 percent and were the biggest drag on the tech-heavy Nasdaq index.
“Until the new iPhones in the Fall start driving the production food chain in Q3, mobile’s going to be weak,” Elazar Advisors analyst Chaim Siegel said.
TSMC, also a supplier to Qualcomm and Nvidia Corp (NVDA.O), said it expects growth this year of 5 percent for the global semiconductor industry, weaker than an earlier forecast of 5-7 percent.
Data provider TrendForce had earlier estimated 2018 global smartphone production at around 1.5 billion units, 2.8 percent up on 2017 but down from a previously expected 5 percent.
TSMC on Thursday estimated 8 percent growth for contract chipmakers, compared with its previous forecast of 9-10 percent.
U.S.-listed shares of TSMC (TSM.N) were down 6 percent, while other chip equipment makers such as Applied Materials Inc (AMAT.O) and Lam Research Corp (LRCX.O) fell about 5 percent and ASML Holding NV (ASML.O) lost 3.6 percent.
Another big industry bellwether, chip equipment maker Lam Research, said on Wednesday its shipments missed consensus estimates for the first time in five years.
Reporting by Sonam Rai in Bengaluru; Editing by Maju Samuel and Patrick Graham
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