After The Close - U.S. stocks bounced back on Friday, with each of the major indexes closing an up-and-down, July 4th holiday-shortened week on a high note. The uptick was driven largely by a resurgent technology sector, which has faced some pressure in recent sessions. The NASDAQ added as many as 76 points at its mid-afternoon peak, helping to salvage a weeklong gain. The Dow Jones and broad-based S&P 500 were also strong. The former added more than 105 points at one time behind solid performances by tech giants Apple (AAPL - Free Apple Stock Report) and Microsoft (MSFT - Free Microsoft Stock Report), as well as McDonald’s (MCD -Free McDonald's Stock Report) and NIKE (NKE - Free Nike Stock Report).
The bullish bent to today’s session was propelled by a solid update from the business beat. The morning’s jobs report from the Labor Department revealed the U.S. economy added 222,000 positions in June, well above the 179,000 estimate. Though an even more pronounced gain may have been prevented by the mixed wage and unemployment data, investors rode the strong report on their way to recouping much of yesterday’s losses.
Meantime, oil continues to struggle. Concerns about elevated U.S. stockpiles, as well as the largely inconsequential drilling limit installed by OPEC, remain drags on the market. Too, the recent strength of the U.S. dollar has further weighed on the domestic commodity, exacerbating the dearth of supply for domestic crude. Accordingly, though most market sectors enjoyed healthy daylong gains, energy stocks lost value on an aggregate basis.
Looking ahead, investor focus will pivot to second-quarter earnings season as early as next week. Citigroup (C), JPMorgan Chase (JPM - Free JPMorgan Chase Stock Report), and Wells Fargo (WFC) headline the first round of reports, and will give traders a better idea of how the major financial institutions are faring amidst a gradually tightened monetary environment. Thereafter, Corporate America’s quarterly performance will be closely watched, as will updates to company-specific guidance.
As the final bell approached, the indexes looked poised to retain most of their gains to close out the week. Breadth favored advancing stocks by a roughly two-to-one ratio. Despite recent choppiness, the market’s level continues to assume deregulatory and tax reform measures will be implemented by yearend. The upcoming earnings slate will go a long way in determining whether or not the bulls can sustain the post-election rally that has faced increasing pressure over the past several weeks. - Robert Harrington
As of this article’s writing, the author did not hold positions in any of the companies mentioned.
11:50 AM EDT - The major U.S. equity averages started the final day of the abbreviated trading week to the upside and are maintaining those gains as we approach the midday hour on the East Coast. The primary catalyst behind the buying was a surprisingly strong report on the labor market, which showed a notable pickup in monthly job creation (more below).
The buying has been rather broadbased, with the only notable weakness coming in the commodity areas. The strength of the U.S. dollar following the labor report is weighing on the commodities, with weakness in the basic materials and energy sectors. The stronger greenback makes commodities more expensively priced in international markets, which may be detrimental to demand. A pullback in oil prices on both the New York Mercantile Exchange and the Continent also is hurting the energy sector this morning. Still, the major U.S. equity indexes are in positive territory, with the Dow Jones Industrial Average once again standing not too far from its all-time high. The S&P 500 Index, the small-cap Russell 2000, and the S&P Mid-Cap 400 index are holding similar percentage gains as the index of 30 bellwether companies. The NASDAQ, which has cooled a bit in recent weeks after a very bullish stretch, is delivering an even bigger advance, on the shoulders of a strong performance by the technology stocks.
As we move closer to the noon hour, most of the major equity groups are in positive territory, with the leadership coming from the more economically sensitive groups. As noted, the technology sector is nicely higher and we also are seeing gains in the consumer (both staples and discretionary) and industrial segments. Overall, advancing issues are modestly outnumbering decliners on both the Big Board and the NASDAQ.
The day’s big news came from the business beat this morning. As mentioned above, the Department of Labor released its latest monthly statistics on employment and unemployment, and both made for encouraging reading. Specifically, total nonfarm payroll employment increased by 222,000 in June, and the unemployment rate was little changed at very low 4.4%. Likewise, the jobs gain figure for April was revised up (from 174,000 to 207,000), and the change for May was revised from 138,000 to 152,000. Employment rose in healthcare, social assistance, financial activities, and mining. Overall, employment growth has averaged 180,000 per month thus far this year, in line with the average monthly gain of 187,000 in 2016. The report was well received by the investment community, as it appears to be easing some of the recent concerns on Wall Street that the pace of growth for the U.S. economy may be slowing a bit in 2017.
Looking ahead to the second half of the session, it appears that the bulls, emboldened by today’s strong labor market data, will be tough to beat. The big story this afternoon may be how much of yesterday’s retreat, the major averages will be able to retrace. At the very least, the indexes are pointing to a higher close to trading today. Stay tuned. - William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The hit-and-miss stock market performance this week remained in place as yesterday began. On point, after rallying strongly for most of the pre-holiday shortened session on Monday, stocks moved back and forth on Wednesday, ultimately doing little before resuming their descent yesterday. In all, it was a wire-to-wire win for the suddenly emboldened bears, as the Dow Jones Industrial Average plunged to an early triple-digit loss, recovered modestly in the early afternoon, before falling even more steeply into the close.
The impetus for the renewed weakness was a further early slide in the technology group, as well as the telecom sector, where Dow-30 component Verizon (VZ - Free Verizon Stock Report) fell to yet one more 52-week low early in the day. Shares of some big name tech stocks also wilted. The tech group, the year's best performing sector through early June, has lost about 5% of its value in recent weeks. Also hurting the market is the sudden rise in global bond yields. At home, meantime, the yield on the 10-year Treasury note is now up to 2.37%.
The market's losses, as noted, persisted into the afternoon, although there was selective buying into the middle of the afternoon, which managed to reduce a one-time 140-point setback in the Dow to about half that amount. But the underlying tone of the session remained weak, as all 10 of the major equity groups faltered, while losing stocks remained about three times as plentiful as winning issues. Among the various sectors, health care and the telecom issues led the descent.
In addition to the selling in technology, health care, and the telecom issues, some big name industrials were sold off, including old-line Dow stock, General Electric (GE - Free GE Stock Report). That stock, for example, was off by more than 4% at the day's nadir, to yet one more 52-week low. There appear to be questions about GE's strategy and sentiment is now quite bearish. Also, there are worries about oil, geopolitical issues (notably with respect to North Korea), and fears about the uneven economy as we head into the second half.
With regard to the economy, the Labor Department just weighed in with its non-farm payroll report for June (see below). That report is the month's most closely watched issuance. But it is not the only key report, as yesterday saw the Institute for Supply Management release figures showing a further modest step-up in non-manufacturing in June. Strength in new orders, deliveries, and prices led the way. But unease about the labor outlook remained the paramount economic concern yesterday.
Meanwhile, the market continued to press lower into the close, and when the final bill was settled, we saw that the Dow had posted a loss of 158 points, the S&P 500 Index had given back 23 points, and the NASDAQ had dropped 61 points. As to the just-issued jobs report, the data showed that the nation had added 222,000 new positions last month. That was well above the expected total of just under 180,000. Also, employment gains were revised higher for both April (from 174,000 to 207,000) and May (from 138,000 to 152,000). In addition, the unemployment rate held steady at 4.4%, the average workweek edged up by 0.1 hour; the labor-force participation rate was little changed at 62.8%; and average hourly wages rose by four cents, the $26.25. Over the past year, average hourly are up by a modest 2.5%.
Meanwhile, Wall Street concerned by the weaker tone of some recent data, but encouraged by both manufacturing and non-manufacturing metrics issued this week, is likely to respond well to the stronger jobs issuance, as the futures are climbing nicely following the release. In all, we expect a solid opening when trading resumes within the hour. - Harvey S. Katz