After The Close - Stocks rose to close out the week, helped out by a strong government employment report. The Labor Department reported on Friday morning before the start of trading that the nation added a better-than-expected 213,000 non-farm jobs in June. Revisions to April and May’s figures showed a combined 37,000 extra positions were gained than earlier estimated, too. And while the unemployment rate rose slightly, from 3.8% to 4.0% that was viewed as stemming from more people joining the workforce. Meantime, wage growth continued to rise only modestly.
All in all, the good news on the employment front set the tone for the day’s trading, in part because an increase in the availability of workers and the lack of what might be considered inflationary levels of wage growth suggested that the economic expansion won’t soon be curtailed by labor shortages or more expensive labor costs.
Then, too, no change in the Federal Reserve’s interest-rate normalization campaign is likely. The Fed is expected to raise short-term interest rates for a third time this year in September, and possibly again in December.
On the day, the Dow Jones Industrial Average climbed about 100 points; the NASDAQ posted a 102-point gain; and the S&P 500 moved up 23 points. Market breadth affirmed the positive trend among the major indexes, with advancers easily outpacing declining stocks on both the NASDAQ and the New York Stock Exchange.
On the down side, nagging concerns about an escalation in international trade tensions may have kept a lid on bullish sentiment. Fresh tariffs on the part of the United States and China took effect today, and President Trump has threatened additional punitive measures if China does not adopt trading practices more favorable to the U.S.
Still, all of the stock market’s major sectors rose for the session, with particular strength in the healthcare and technology issues.
Among individual stocks, shares of biotechnology leader Biogen (BIIB) soared on word of a potential breakthrough drug for Alzheimer’s disease.
In other markets, oil prices pushed higher in New York trading, with the quotation for the benchmark West Texas Intermediate blend rising about $0.80 a barrel, to around $73.75.
For the first week of July, the Dow Industrials rose on good performance following Wednesday’s Fourth of July holiday. Late next week, the focus will turn to corporate earnings reports. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell - Wall Street followed up a sudden and sharp selloff in the equity market during Tuesday's abbreviated pre-holiday session with a nice buying burst yesterday morning. On point, the Dow Jones Industrial Average jumped out to an initial gain just north of 180 points. Optimism about the possibility that the Administration was considering concessions on the tariff front against the European Union helped get the rally under way. However, that good news had a somewhat short-lived impact. Indeed, as we passed the first hour of trading about half of that initial gain had withered away.
Meanwhile, among the groups gaining nicely early on, we saw solid increases in the telecom and the basic materials categories. All told, the early going saw all of the 10 leading equity groups move higher. The car makers, including General Motors (GM), rose on those tariff hints, as did some other industrials that are trade sensitive. The stock market's level of volatility has increased notably in recent weeks on those trade fears, which especially have been directed at China. The concerns are that a trade conflict of some severity would ultimately damage the economy.
In other news, Automatic Data Processing’s (ADP) private-sector payroll report for June showed that 177,000 jobs were added last month. That was just below the consensus forecast, in part because demand is so strong that there are not enough people around to fill the positions. This report can be a harbinger of the more consequential government payroll report issued just moments ago (see below). Meanwhile, in other news, the Institute for Supply Management reported that its survey on non-manufacturing came in at a strong reading of 59.1 for June. That was above expectations, and furthered the case for a strong second-quarter showing by the economy.
Indeed, things seemed to be aligning for a June-period GDP gain of 4%, or more, with the flash estimate on the quarter's growth due out late this month. In the meantime, the market's early strength eased off further as the morning progressed, so that as we passed the 90-minute mark to the trading session, the Dow's one-time 180-point gain was practically gone. However, that pullback would be brief, and the positive momentum would resume shortly, with the blue-chip composite regaining all of its lost ground, so that as the afternoon got under way, that index was up by some 170 points. Just about all of the groups were benefiting.
The equity rally would continue as we moved further into the afternoon and as the United States prepared to levy tariffs on goods imported from China. Many pundits fear that the ratcheting up of the trade conflict with China will inevitably start to take a toll on our economy. Still others contend that at least some of the potential negative vibes on trade has been priced into the stock market already. We shall see. Meantime, in other news yesterday, the Federal Reserve released a summary of its latest FOMC meeting, with the minutes from that gathering coming out at 2:00 PM (EDT). Worries persisted that the economy might grow too strongly.
That said, the market would rally into the close, with the final tallies showing that the major indexes were at or near their respective session highs on optimism about the economy and the upcoming profit reporting season. In all, the Dow would add 182 points; the S&P 500 Index would climb 23 points; and the NASDAQ would ascend 84 points, making it along with the small-cap Russell 2000 the day's best performers. Also, nine of the ten major equity groups closed higher, led by technology, with only the energy sector posting a decline for the session. Finally, gaining stocks held a formidable lead on declining issues on the Big Board to the tune of almost three-to-one.
So, all was upbeat as the Street prepared for the all-important non-farm payrolls report just released. As to that critical survey, the Labor Department reported that the nation added 213,000 new jobs last month. Expectations had been for an increase of 195,000 new jobs. In other employment news, the jobless rate came in at 4.0%; expectations had been for that level of unemployment to stay level at 3.8%. However, this surprise could just mean that the jobs situation is now to string that many more Americans now are looking for employment, and so are once more counted as unemployed rather than out of the labor force entirely.
At the same time, the labor-force participation rate came in at 62.9%; that represented an increase from the May tally of 62.7%, and was also an encouraging metric. Also, average hourly wages increased by 0.3% in June; such wages are up 2.7% over the past year. All in all, this was a very strong employment survey result.
But with the focus on the trade war with China, there was little impact on the equity futures, which were showing little change as we headed toward the open. As for other indicators, the major indexes showed gains in Asia overnight, overcoming earlier setbacks, while in Europe, the key bourses are posting early losses. Bond yields, meantime, are down somewhat, as well, as are oil prices. - Harvey S. Katz, CFA