Why Stocks Are Soaring


Blue-chip stocks are broadly higher this afternoon after the Bureau of Labor Statistics released better-than-expected jobs figures for the month of May. With roughly an hour left in the trading session, the Dow Jones Industrial Average is up by 156 points, or 1.05%.

According to the BLS, the U.S. economy created a net 175,000 jobs last month. For what it's worth -- which generally isn't much -- economists surveyed by MarketWatch predicted an increase of 164,000 jobs. Yet the expectation-beating job-creation wasn't enough to push the official unemployment rate down: The latter increased to 7.6% from 7.5% the preceding month as a net 420,000 people entered the labor force.

A Yahoo! Finance blog post captured the market's reaction appropriately, noting that the report was "good, but not too good." On one hand, great news on the jobs front could induce the Federal Reserve to ease off of its support for the economy, which, in turn, would likely cause equity prices to deflate. But on the other hand, bad news would incite fear of a potential double-dip recession. Just like Goldilocks' porridge, a slight beat was just right as far as the market was concerned.

On the individual stock front, shares of Travelers Companies are leading the Dow higher this afternoon, up by 2.3% at the time of writing. Given that it's an insurance company, the fact that the jobs report wasn't outright awful probably has a lot to do with Travelers' ascent today. The better the economy is doing, the sooner long-term interest rates will increase. And the sooner long-term rates increase, the sooner Travelers' bottom line will pick up to full steam.

Alternatively, the worst-performing blue-chip stock today is AT&T , followed closely by its primary competitor, Verizon . While it's always hard to pin down the precise reason that a specific stock is moving on any given day, it's particularly tough in the case of the telecoms of late, as there has been a litany of news stories involving the sector.

It was recently announced, for example, that Apple will begin accepting old iPhones in exchange for credit to be applied to newer versions. This would, presumably, boost activity at both AT&T's and Verizon's stores. Yet Apple also recently lost a patent suit that could lead to a ban on sales of certain older iPhone versions. One would expect this to depress telecom stocks. And finally, reports have been leaking over the last few days about the U.S. government's accumulation of telephone and Internet records from Verizon (and, presumably, AT&T as well).

At the end of the day, it's anybody's guess why these stocks were up yesterday and down today. But aside from discouraging investors, this unpredictability simply underscores the wisdom of eschewing short-term stock-trading in favor of long-term investing.

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The article Why Stocks Are Soaring originally appeared on Fool.com.

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