The stock market is both reacting on reality and is divorced from "the economy," and will continue to become more and more divorced from "the economy" as long a

The stock market is both reacting on reality and is divorced from "the economy," and will continue to become more and more divorced from "the economy" as long as the financial performance of publically traded companies continues to be divorced from GDP. The stock market value is the expected net present value of the cash flows of the assets that make up the market (realized through dividends, buybacks, exits, etc) (and keep in mind that the expectation can be and will be wrong/influenced by behavioral factors etc - expectations are calculated by humans). Today, lower unemployment than expected meant that traders believed companies' bottom lines will improve as more people than expected might have incomes and spending money. Take for granted that the market price yesterday incorporated the expectation of 16% unemployment (and I notice some argument that it doesn't - it's pretty much irrelevant if it actually did or didn't when it comes to explaining the price move today. People were happy for whatever reason to pay the price of the stock at market close yesterday with what they knew about the economy. Now that the news shock is positive, on average, they will be willing to pay more than if they recieved no news). Then, with good economic news, that investors believe will mean an increased net present value of the stocks on the market, you'll see prices go up.