Here’s why the Dow and S&P 500 hit records despite a weak April jobs report

It may take more than a much-weaker-than-expected April jobs report to kill the U.S. stock market rally, analysts said, though the popular reflation trade — bets that stocks more sensitive to the economic cycle will outperform their peers — saw a modest setback on Friday.

“The market is rallying as the disappointment leaves the door open for the Fed to keep financial conditions easy for longer and delays the tapering and rate-hiking conversations for the time being,” said Cliff Hodge, chief investment officer at Cornerstone Wealth.

Simply put, it’s a case of bad news on the economy translating into good news for stocks.

The U.S. economy created just 266,000 jobs in April, the Labor Department reported, far short of the consensus forecast for a rise of 1 million. The unemployment rate also rose to 6.1%.

“The bottom line is that it was a disappointing jobs report,” said Jeff Schulze, investment strategist at ClearBridge Investments, in a phone interview. But Schulze still expects a booming economic reopening to favor cyclical and value stocks over coming months, with jobs growth still likely to accelerate in the months ahead.

Major U.S. stock indexes, after a mixed start, were higher, with the technology-heavy Nasdaq Composite COMP, +0.88% bucking its recent underperformance to jump more than 1% in early activity. It ended the day up 0.9%, leaving it with a weekly fall of 1.5%.

Interest rate-sensitive tech and growth stocks were somewhat reinvigorated as Treasurys rallied, pulling down yields, with the rate on the benchmark 10-year note TMUBMUSD10Y, 1.577% dipping below 1.5%.

The 10-year yield later edged back into positive territory, ending the day up 1.5 basis point at 1.576%.

From: MarketWatch