JPMorgan, Financials Lift the Market as Employment Growth Stays Strong

Bullish investors got exactly what they wanted this week, as February has started with a bang and helped the stock market recover all of its losses from last month and then some. Friday's release of the latest economic data on job creation and unemployment helped drive further optimism about the U.S. economy, and investors responded by bidding up stocks for what would be the fifth straight day. As of 11:15 a.m. EST, the Dow Jones Industrials had climbed about 40 points, starting to approach the 18,000 level once again as some investors start thinking about whether the market could climb toward new record highs for the first time in 2015.

Helping to lift the Dow was Wall Street bank JPMorgan Chase , which picked up more than 3% on a strong day for the financial sector generally. Banks have struggled with the uncertainty regarding when interest rates will start to rise, as the decline in longer-term rates has posed a threat to interest income. As the economy picks up, though, the potential for a long-awaited reversal in bond yields grows, and greater stability in the oil patch has also improved the outlook for the banking sector in general. JPMorgan still faces some potential liability stemming from the financial crisis; just earlier this week, the bank entered into a $500 million settlement with investors in a class-action lawsuit over mortgage securities sold for almost $18 billion by the JPMorgan-acquired Bear Stearns. Overall, though, the bank has done a good job of winding down the legal fallout from the market meltdown, and positive economic prospects could help JPMorgan restore its past growth rates.

Source: Flickr user Andreas Klinke Johannsen.

Throughout the stock market, news from the labor market showed some encouraging signs. Nonfarm payrolls rose by 257,000 jobs in January, and the Bureau of Labor Statistics also revised its job-growth figures for November and December upward by a total of 147,000 jobs. The unemployment rate rose to 5.7%, but most economists saw that as a positive sign, as labor-force participation rates reversed their recent downtrend and rose, indicating greater optimism among job seekers that they will find suitable work. Moreover, wage growth finally started to show up in the figures: Average hourly pay topped expectations with a 0.5% rise in January, sending the year-over-year gains above the 2% mark and showing that ordinary Americans are starting to participate more fully in the economic recovery.

Overall, the stock market benefits when the economy is strong. The big fly in the ointment, though, is that with the rest of the globe showing weaker economic conditions, a healthy U.S. is attracting capital and pushing up the value of the dollar, which hurts U.S. multinational corporations. What's particularly encouraging is that even as better prospects make it more likely that the Federal Reserve will raise interest rates sooner rather than later, stock investors aren't abandoning the market. That's a healthy sign that could bode well for the rest of 2015.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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