Why the Dow Jones Is Up Today

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) is forging further into record territory following better-than-expected reports on the U.S. jobs market. As of 1:10 p.m. EDT the Dow was up 73 points to 16,909, led by Goldman Sachs (NYSE: GS  ) . Meanwhile, the S&P 500 (SNPINDEX: ^GSPC  ) also hit an all-time high, rising 7 points to 1,948.

The main reason the Dow Jones and S&P 500 are hitting new highs is the positive jobs report, as well as continued momentum from yesterday's European Central Bank stimulus plan.

Report

Period

Result

Previous

U.S. Nonfarm payrolls

May

217,000

282,000

U.S. Unemployment rate

December

6.3%

6.3%

The Bureau of Labor Statistics estimates that the U.S. economy added 217,000 jobs in May. That's better than the 210,000 jobs analysts were expecting. Further, some analysts had been worried that April's 288,000-job gain was overstated. Those fears were put to rest today, as April's jobs report was only mildly revised downward to 282,000.

In further good news, the unemployment rate was unchanged at 6.3% as more people who hadn't previously been looking for work entered the labor market. Neither of these reports indicates any real change in the story of the past few years: The economy is slowly getting better, as is the jobs market. However, both are still weak. Millions of people are stuck in part-time jobs, and the economy has been propped up by massive stimulus from the Federal Reserve.

Today's Dow leader
Goldman Sachs is up 1.6, rising along with the financial sector, which is the top-performing sector on the S&P 500 today.

Source: Finviz.com.

The financial sector is rising as a result of the positive jobs numbers, which bode well for U.S. growth going forward, as well as the European Central Bank stimulus plan. The plan is good for banks, as it includes the possibility of 400 billion euros' worth of asset purchases through "long-term refinancing operations." The gist of the plan is that the bank would buy asset-backed securities from European banks to lower long-term rates and hopefully boost inflation.

The one problem is that Europe does not have the securitization infrastructure that the U.S. has, so there aren't enough asset-backed securities for the European Central Bank to buy. This opens up a potential opportunity for Goldman Sachs, as well as other investment banks that are key players in the U.S. securitization market, to help build and trade a larger European asset-backed securities market.

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