Stocks Soar On Powell Promise, Jobs Juice

One day after a broad-based, stomach-churning drop in the market, the result of rising economic fears following Apple's revenue guidance cut and a plunge in the ISM manufacturing index coupled with jitters over the latest FX-market flash crash, stocks staged a powerful comeback, recouping all of their Thursday losses, on the back of renewed optimism over US trade negotiations with China, a Chinese RRR cut and a powerful intervention by Beijing's plunge protection team in Chinese stocks, and a stellar jobs report.

“The strong December jobs report is a net positive for stocks because investors’ biggest concern has been slowing growth,” said FTSE Russell managing director Alec Young. "December’s strong job gains help ease that concern. It’s hard to square recession worries with the strongest job growth we’ve seen in years" Young added after payrolls not only surged by over 300K but average hourly earnings surprised to the upside and rose by the most since 2009, signaling that inflation is anything but dead.

 

But the biggest catalyst for today's rally was today's statement by Chairman Powell which eased much of the market's fears that the Fed put is dead and buried.

Speaking on a panel with Janet Yellen and Ben Bernanke, Powell said central-bank policy is flexible and officials are “listening carefully” to the financial markets. Critically for traders worried about shrinking liquidity in the economy, Powell also signaled a willingness to consider changes to the Fed’s gradual run-off of its balance-sheet in any policy review.

That was enough to unleash the animal spirits, with stocks surging after Powell's comments which many saw were directed squarely at the market.

 

“The Powell/Yellen/Bernanke show had a simple purpose: re-assure the market that the Fed is not in disarray and that it will act to protect the market on a further downtick than what we saw in December,” WallachBeth strategist Ilya Feygin told Bloomberg. “The Fed will likely keep rates on hold for a while until it has more confidence in the data.”

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