USA stock markets rallied on Friday after data showed the economy added the most number of jobs in eight months in June, with the S&P closing just 5 points shy of its record high of 2,134.72. The gains left the S&P 500 on pace to close at a record high, with the Dow Industrials within one percentage point of the blue chip index's record high.
The S&P 500 gained 10 points, or 0.5 percent, to 2,140. Yields on U.S. Treasury notes rose.
Still, while it's all well and good to say that stocks offer better relative value than bonds at this moment - which is unarguably true - if we look out over the next three, five or 10 years, it's probably worth tethering oneself (and one's portfolio) to some notion of absolute value. JPMorgan was up 1.3 percent and provided the biggest boost to the S&P. But the Russell 2000 index of small-cap stocks rose 1.1%, outperforming the other indexes. Brent crude, a standard for worldwide oil prices, lost 25 cents to $46.51 a barrel in London.
The US Labor Department said on Friday 287,000 jobs were created in June, 112,000 more than expected and a sharp improvement on May's 11,000 that had raised fears of a potential recession.
While recent data has pointed to a recovery in the US economy, the Federal Reserve is expected to remain cautious on raising interest rates as it gauges the fallout of the Brexit vote.
Treasury yields hovered around record lows, indicating a weak appetite for riskier assets. The last closing high for the index was 2,130.82 on May 21, 2015. Yields move inversely to prices.
Earnings would have to grow to normalize the now heady valuations of S&P 500 companies. Analysts predict profit for S&P 500 companies will drop 5.7 per cent, which would make it the fifth straight quarterly decline, the longest streak since 2009. Robert Shiller's cyclically adjusted earnings, which takes a 10-year trailing average of inflation-adjusted earnings, is just 4% higher than it was two years ago.
The British pound jumped after Conservative party leadership candidate Andrea Leadsom pulled out of the race to be the UK's prime minister, leaving favorite Theresa May with a clear path to becoming the country's next leader. The dollar rose to 102.54 yen from 100.46 yen. The group was boosted by semi-conductor companies, including Qorvo Inc. and Skyworks Solutions Inc., which added more than 2.5 per cent. The Philadelphia Semiconductor Index climbed 1.2 per cent, extending its four-day gain to 5.5 per cent.
The Bank of England meets on Thursday and investors have ramped up expectations for a cut to interest rates.
Among the best performers on the Nasdaq is biopreservation specialist BioLife Solutions Inc (NASDAQ:BLFS), up 77.1% at $2.71, after announcing a 10-year supply agreement with biotech stock Kite Pharma Inc (NASDAQ:KITE).
Profits may be showing signs of turning a corner, despite second-quarter earnings forecast to decline 4.7 percent versus a 5.0 percent decline in the first quarter, with a return to growth anticipated throughout the second half of the year, according to Thomson Reuters data.
-Dominique Fong and Jenny Gross contributed to this article.