After The Close
An upbeat November jobs report propelled the bulls on Friday, with each of the three major indexes registering strong full-day gains. As per the U.S. Bureau of Labor Statistics, it reported nonfarm payrolls had increased 228,000 positions last month, beating expectations. The average hourly wages grew slightly, while the unemployment rate remained by its 17-year low of 4.1%. This set the stage for a mostly uninterrupted rally to close the week.
Large-cap strength was led by the S&P 500, though the Dow Jones Industrial Average and NASDAQ each posted meaningful advances. The small-cap Russell 2000 finished the week a few points above its breakeven line. Looking at the market sectors, all but one of the industry groupings finished the day in positive territory. But softness in the utility sector was more-than overshadowed by full-session momentum in the healthcare, energy, and telecommunications composites, among others. Broadly speaking, advancing issues outnumbered declining shares by a 1.5-to-1.0 ratio.
Meanwhile, oil climbed nicely on Friday, but was unable to make it back to early-in-the-week high levels. Rising U.S. inventory of refined gasoline remains elevated, which negated a gradual reduction in crude supplies. OPEC’s extended production limit may be subject to a midyear review, should Russia and other participants deem the current market environment overheated. Overall, while U.S. crude oil posted its biggest weekly loss in two months; the commodity market remains bullish for 2018. Encouraging import trends from China helped to stoke Friday’s rally.
While the stock market was unable to climb back to its early week highs, Friday’s bullish tone helped to offset some of the midweek selling pressure. For the full five-day period, the Dow and S&P 500 each realized modest gains. Still, due to profit taking in the technology sector, one of the year’s strongest performers, the NASDAQ slipped a few points from last week’s closing level. Investors will be keeping an eye on the Federal Reserve next week, with the central bank likely to increase interest rates. Budgetary and tax-related discussions on Capitol Hill will also play a role in deciding where stocks end up as 2017 nears its end.
— Robert Harrington
At the time of this article’s writing, the author did not have any positions in the companies mentioned.
Mid-Day Update - 12:15 PM EST
Stocks began the day with a solid uptick, and largely held on to those gains throughout the morning.
On the economic front, the Bureau of Labor Statistics released its jobs data for November. The report indicated that the nation’s nonfarm payrolls expanded by 228,000 positions last month, topping expectations, and the unemployment rate held steady at a 17-year low of 4.1%. Despite the tight labor market, however, average hourly earnings nudged up a relatively modest 0.2 percent. The Federal Reserve meets next week, and the jobs report strengthens the case for the lead bank’s already widely anticipated announcement of an increase in the fed funds rate. However, the tepid wage growth may hint at some possible moderation in next year’s hikes.
In other news, the potential for a government shutdown was postponed until December 22nd, thanks to a two-week funding bill. Investors are likely hopeful that the next couple of weeks will see the federal funding budget extended further. Elsewhere, the University of Michigan announced that its latest consumer sentiment index fell to a three-month low. However, the current reading remained among the highest recorded so far this decade.
As we crossed the noon hour of trading in New York, the key equity indexes were uniformly higher, though slightly off of their peaks for the session. The Dow Jones Industrial Average was ahead by 78 points or about one-third of a percent; the broader S&P 500 was doing a little better, up by 10 points; and the tech-heavy NASDAQ was faring the best of the lot, with a 35-point advance (0.5%).
Breaking it down by market sectors, nearly every group was in the green, led by healthcare, technology, and consumer cyclical issues. On the other side of the ledger, utilities were the only decliners, but the losses were very slight. Meanwhile, oil prices enjoyed an early uptick, with light sweet crude futures holding onto a 1.4% gain, to about $57.50 a barrel.
Over in Europe, the major bourses were up nicely at the close of the trading day, mostly thanks to bank stocks which got a boost on the back of some easing of regulatory requirements. Britain’s FTSE 100 led the pack with a gain of 1.0%. Germany’s DAX was just a shade behind (0.8%) while France’s CAC-40 advanced a more modest 0.3%.
– Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell
In all, as we finished the first 90 minutes of the trading day, the Dow Jones Industrial Average had turned higher by some 45 points and the NASDAQ was ahead by 40 points. Also, unlike Wednesday, the S&P Mid-Cap 400 Index and the small-cap Russell 2000 composite were strongly higher, while advancing stocks held a 17-to-10 lead on declining issues on the Big Board, and a wider edge on the NASDAQ. Also, sectors rising in price were well ahead of those falling in value, with the technology and industrial areas doing especially well, while the consumer non-cyclical group was one of two laggards (along with the utilities).
Then, as we headed toward the noon hour in New York, we saw some backtracking, with the aforementioned Dow increase easing back some. But that falloff was just momentary. In fact, as we headed into the first part of the afternoon, the resolve of the bulls stiffened, with the Dow climbing by more than 120 points at one time. The NASDAQ, too, strengthened. However, as we moved more deeply into the second half of the trading day, the averages eased back some, with the Dow's gain more than halved as we reached the final hour of trading.
However, that selling did not last all that long, and as we moved into the final hour of trading, the indexes had all perked up anew. To be sure, the market is ripe for some profit taking, as there are some concerns about the specifics of the House-Senate tax reform bill that is likely to emerge within weeks. Also, yesterday afternoon may well have seen some choppiness ahead of the key release on non-farm payrolls (see below). Whatever the reasons, the mid-afternoon pullback proved mild and short-lived. As to the jobs data, expectations had been for an increase of 190,000 positions in November. The results were even better.
As we hit the home stretch, the averages held onto their modest gains, with the Dow ending 71 points higher, while respective gains of eight and 36 points were logged by the S&P 500 and the NASDAQ. As was the case throughout the day, gaining issues held a solid lead, of nine to five on both the NYSE and the NASDAQ, while eight of the ten key sectors gained in price. Interestingly, the biggest mover was the consumer noncyclical group, which fell by almost a percentage points. A quick glance at some of the food stocks, including Kraft Heinz (KHC) and Campbell Soup (COB) underscores this retreat.
Returning to the employment situation, the U.S. labor Department reported that the nation added 228,000 jobs last month, a total that was materially above the 190,000 tally that initially had been forecast. Also of note, in a separate survey, it was reported that the nation's jobless rate held steady at a multi-year low of 4.1%. That had been the forecast for November. What's more, average hourly earnings for all employees on private non-farm payrolls rose by $0.05 last month. Over the past year, such wages are up by $0.64, or 2.5%.
In addition, the change in total non-farm payroll employment for September was revised up from 18,000 to 38,000 (September's jobs total had been kept down by the series of hurricanes that struck the South, the Southwest, and Puerto Rico), while the total of jobs was revised downward, from 261,000 to 244,000 in October. The lone down note was the fact that the labor-force participation rate held steady at 62.7% in November, having shown no clear trend over the past year. Overall, though, the report was supportive and was consistent with further solid GDP growth in the current period.
As for the market's reaction, the U.S. futures are trending nicely higher as we near the start of trading, having been ahead before the jobs report was issued and strengthening somewhat thereafter. Also of note, shares in Europe are higher, boosted by some progress on the Brexit talks, while the indexes were strong in Asia overnight, as trade data out of China surpassed expectations. In action closer to home, Treasury yields are little changed and oil prices are up once again. All told, this shapes up as a constructive session stateside.
At the time of this article's writing, the author had positions in Kraft Heinz.
