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U.S. stocks continued to rally on Friday, with the S&P 500 closing above the 1,600 milestone level and the Dow hitting 15,000 points for the first time in history.
Fueled by better-than-expected U.S. unemployment figures in April, by the closing bell, the Dow surged 142.38 points, or 0.96 percent, to 14,973.96 points. The S&P 500 soared 16.83 points, or 1.05 percent, to 1,614.42 points. The Nasdaq Composite Index leapt 38.01 points, or 1.14 percent, to 3,378.63 points.
The Dow and the S&P 500 have repeatedly setting new highs since March. Year to date, the Dow, the S&P 500 and the Nasdaq were up 14.27 percent, 13.20 percent and 11.89 percent respectively.
"Goldlocks" data lift indices to uncharted territory
The Labor Department said the U.S. unemployment rate edged down to 7.5 percent in April, its lowest level since December 2008, while total nonfarm payroll employment rose by 165,000 in the month.
"What lit this fuse this morning, which I find curious, is the jobs number," said Keith Bliss, senior vice president and director of sales and marketing at Cuttone & Company.
"I think the best way to term it is 'goldilocks' number," Bliss told Xinhua, explaining that the number is "just right" and offers comfort on two fronts: First, the U.S. economy is not collapsing, and second, the Fed is going to keep their bond-buying program.
Talking about the extraordinary rally, Kenneth Polcari, director of NYSE Floor Operations at O'Neil Securities, said: "On the one hand, it's very exciting; on the other hand, I think the reaction today is well overdone."
"We've seen two months of flat to negative macro reports, which leads you to believe that we've got one report today which is a little bit better than expected, but was mediocre though ... It's more of a momentum type of rally," Polcari told Xinhua.
The U.S. non-manufacturing PMI dropped from 54.4 in March to 53.1 in April, the lowest in nine months, the Institute for Supply Management said Friday in a report.
New orders for manufactured goods in March fell 4 percent, the biggest decline in seven months, the U.S. Commerce Department said Friday.
Market to break "sell-in-May" mojo this time?
Over the last three years, the U.S. equity market generally followed the old adage of "sell in May and go away" -- a seasonal pattern that is expected to see investors take profits, thus leaving the stock market typically weaker from May to October.
Will this mojo be broken this year after Wall Street posted an extraordinary performance since the beginning of this year? Traders were divided.
"Two to three days ago, I would say no 'sell in May and go away'because we could see the momentum building into the market," Bliss of Cuttone & Company said.
However, with the market up at this level, investors and traders are starting to get nervous and that nervousness may now just carry on up to a higher level, he added.
"But I'd be surprised if we pull back in any great way in May right now. We may see volumes fall off. But I think we will go sideways for a while at the very worst," Bliss said.
Polcari of O'Neil Securities said he does not think the market is going to get that "sell-in-May" mentality at the moment, because the U.S. Federal Reserve's asset-purchase program at a pace of 85 billion dollars per month is pumping massive liquidity into the market.
However, Joseph C. Greco, managing director of trading and sales of Meridian Equity Partners, said that after the strong rally, the stock market will see a dip in May and he did not expect the market to reverse the seasonal market pattern of "sell in May and go away."
A "juicy" market by Fed's stimulus
The Fed's stimulus drove up the stock market to its record high against a backdrop of an anemic U.S. economy.
"It's very hard to fight that (the Fed's influence) inside the equity market no matter what you think about the general economy," Bliss said.
As long as the Fed keeps stimulating, there will be "an awful lot of juice for the equity markets," he said.
With the U.S. unemployment rate still elevated, the Federal Reserve and probably global major central banks will not pull back on their monetary policies anytime soon.
The U.S. Federal Reserve on Wednesday decided to keep its stimulus policy in place, but changed its previous dovish tone to a more neutral one.
It said it was prepared to "increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes."
The European Central Bank on Thursday cut its benchmark refinancing rate by 25 basis points to a record low of 0.5 percent. The Bank of Japan also unveiled an unprecedented massive bond-buying plan at the beginning of April.
"We are not even halfway through the year yet, and we are already up 13 percent. That's what makes a little bit nervous," Polcari said.
"But where we go from here? Are we going up 23 or 25 percent? I don't see it. Could the market still be higher? I think yes," he said.
He predicted that based on the S&P 500's current price/earnings ratio, which is about 15 times, the S&P 500 may see more upside from here by another 40 points to around 1,650 by the end of this year.
But Greco of Meridian Equity Partners, believing that there was a bit of bubble in the stock market, predicted that the equity market would be lower at the end of this year from now.
