Equity markets enjoyed one of their strongest days in recent memory today. Indeed, nearly every major index from the Dow 30 to the S&P 500 ended the day up between 1% and 2%, despite some mixed signals. Why are stocks up today?
It seems today’s bull swing is the result of cryptocurrency’s surge this year. Today, the second-largest crypto by market capitalization, Ethereum (ETH-USD), crossed the $2000 per coin threshold for the first time since May 2022. Not for nothing, Ethereum is up more than 65% so far in 2023. That’s a notable feat, especially in the context of last year’s brutal selloff. From a peak of almost $4,900 per coin in November 2021, ETH ended 2022 at just about $1,200 — a roughly 75% plunge.
Ethereum is likely enjoying some added attention from the successful launch of its recent Shanghai upgrade. The new update, previously codenamed “Shapella,” boasts higher transaction limits and lower fees. Shanghai was released on Wednesday to generally positive reception.
Why Are Stocks Up Today?
Ethereum has performed well, but it’s not the only reason for the upswing in stocks today. Labor market data released this morning showed a mild downtrend in jobs. Initial filings for unemployment insurance reached 239,00 for the week ended April 8, the highest level since January of last year.
Initial jobless claims rose last week, but the labor market stayed tight. “We expect claims to trend higher through the rest of the year and peak in Q4 as the economy begins to emerge from a mild recession,” said lead U.S. economist at Oxford Economics Oren Klachkin to clients in a note today, “The upcoming labor market downturn will be modest since the drop in demand will be fairly modest and the labor pool will stay relatively small.”
While rising jobless claims are typically bearish indicators, this time around it’s a bit more complicated. Over the past year or so, the Federal Reserve has had one goal in its rate-hike efforts: lower inflation. Unfortunately, it has been something of a slow trickle, in no small part due to a surprisingly resilient labor market.
As such, some economists have been waiting for unemployment to catch up to interest rates, to facilitate further drops in inflation. Today’s unemployment news may in fact read as evidence that not only is inflation likely to head downwards, but that the Fed has reason to lay off the figurative rate-hike button at its upcoming May meeting. That is to say, this is one of the rare moments when rising unemployment could be quite bullish.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
