It's always darkest before the dawn.
Following a month of dismal economic reports suggesting that the domestic manufacturing sector is contracting, investors and traders cheered positive data released by the U.S. Department of Labor today. The official unemployment rate for September fell to 7.8% -- the first time it's been below 8% since the beginning of 2009. As a result, the Dow Jones Industrial Average (DJINDICES:^DJI) headed higher by 60 points in intraday trading.
According to the report, the U.S. economy added 114,000 nonfarm-payroll jobs in September. This was notably worse than economists had forecasted. The consensus estimates, according to Bloomberg and the Dow Jones Newswire, were for 115,000 and 118,000 jobs, respectively. In addition, revisions to July and August data suggest that a total of 86,000 more jobs were added in those months than originally reported.
In a statement released to the press, Secretary of Labor Hilda Solis noted:
The significant drop in the jobless rate was driven by people going back to work, not leaving the labor force. We saw unemployment drop for every group across the board last month. The fastest-growing group of new hires was young people ages 20 to 24 -- a very encouraging sign for our country's future.
As many more Americans found work in September, we're also seeing other indications of a strengthening labor market and a quickening recovery. New Unemployment Insurance claims are down to pre-recession levels, consumer confidence is near a five-year high, and the number of people laid off last month was at the lowest level ever reported.
The day's biggest winners and losers
Following the announcement, stocks are broadly up, with only four of the Dow's 30 components trading lower.
Among the stocks heading higher are Home Depot (NYSE:HD) and Bank of America (NYSE:BAC). With respect to the former, more jobs mean more people can afford to make home improvements -- Home Depot's bread and butter. With respect to the latter, Bank of America is one of the most volatile stocks in the market, thus its participation in the rally is to be expected.
Among the stocks heading lower are Caterpillar (NYSE:CAT) and McDonald's (NYSE:MCD). Both of these companies have destroyed the broader market over the last five years as investors rushed into investments with stable revenue streams and reasonable dividend yields. It makes sense, in turn, that both stocks have given back some of these relative gains this year.
Knowledge is power
To learn more about the most-talked-about bank out there, check out our in-depth company report on Bank of America. The report details Bank of America’s prospects, including three reasons to buy and three reasons to sell. Just click here to get access.
Fool contributor John Maxfield owns shares of Bank of America. The Motley Fool owns shares of McDonald's and Bank of America. Motley Fool newsletter services have recommended buying shares of McDonald's and The Home Depot. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.