After The Close - Stocks closed sharply lower on Friday on lingering concerns about the effects of the coronavirus on economic growth. Weak industrial production data in Germany also weighed on sentiment.
The slippage in equities came despite an unexpectedly strong January jobs report this morning that showed a gain of 225,000 jobs. That was well above expectations for about 160,000 additions. Moreover, November and December figures were revised higher by a combined 7,000 jobs, putting the three-month average for new positions at a very healthy 211,000.
The numbers ring true, given the fairly widespread amount of help wanted signs that can be seen in the course of everyday activity. Wages are up, too, although still not at a pace that might be expected with unemployment low for so long.
Most sectors of the economy contributed to the job growth, which may have been helped by unseasonably warm temperatures in January. Manufacturing lost jobs, though, continuing a weak stretch for that one-time mainstay for workers.
Under different circumstances, stocks might have rallied with the upbeat employment data. But the spread of the coronavirus in China has led some forecasters to downwardly revise their expectations for that nation’s first-quarter GDP, in some cases steeply.
Stocks by mid-morning came off of their lows, likely on word from White House representatives that any delay of purchases by China of U.S. goods because of the coronavirus would probably be made up later this year.
But the market clearly had a defensive tone, with shares of good-dividend-paying utilities and real estate investment trusts faring the best. Bond prices also rose, with the yield on the benchmark 10-year Treasury note falling to 1.58% from 1.64% on the day (yields and prices move in opposite directions).
Sectors dependent on business expansion, such as energy, were weak, however. The price of domestic oil fell slightly, to just over $50 a barrel in New York trading. Energy stocks have been among the poorer performers so far this year.
Overall, stocks may have been due for a bit of a breather, after a nice run for the first four days of the week.
At the closing bell, the Dow Jones Industrial was down 277 points; the NASDAQ fell 52 points; and the S&P 500 dropped 18 points.
Concerns about the coronavirus have reintroduced volatility to trading largely absent during much of the past year’s big rally. - 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 tried for the proverbial four-peat yesterday, as the stock market began the penultimate session to the upside following trio of strong advances the previous three sessions. But this attempt at four-straight wins ran into some headwinds early in the morning, and after a few minutes, the Dow Jones Industrial Average, which had been up by more than 100 points, fell into the red briefly.
But, as noted, this was a short sojourn into negative territory for the blue chips, and soon that index was back in the green along with the S&P 500 Index and the NASDAQ, which had stayed positive right along. The market was continuing to benefit from a cut in tariffs by China on U.S. exports totaling $75 billion.
The strength in the market has been impressive, with the S&P 500 Index and the NASDAQ both climbing to closing highs yesterday, while the Dow soared by almost 500 points. All the while, the number of coronavirus cases continue to increase.
Meanwhile, earnings continue to flow in and for the most part the results have pleased the Street. On point, shares of Twitter (TWTR) were up sharply yesterday on the strength of its results.
And on the economic front, the government reported that jobless claims fell to their lowest point in several quarter for the latest week, coming in at just 202,000. This report came ahead of the monthly jobs data, which was issued this morning (see below). There also was good news on productivity and wage gains.
The market then would steady itself as the afternoon got under way, with the Dow again pushing past the 100-point increase market, and joining the S&P 500 Index and the NASDAQ in record-high territory. However, the small-cap Russell 2000 and the S&P Mid-Cap 400 both lagged into the midafternoon. Leading the way higher were shares of IRobot Corp. (IRBT) which soared almost 17% after posting a revenue beat. Meantime, Wednesday's prime casualty, Tesla (TSLA) staged a partial recovery. The market's gains, though, largely reflected better economic news and hopes on the coronavirus front.
This improvement in the afternoon would continue into the close, although the Dow would close a little off its intraday highs. In all, the blue chips rose 89 points; the S&P 500 added 11 points; and the NASDAQ, boosted by some solid tech gains, jumped 63 points.
Now, a new day begins and the headline event is the latest jobs report, in which the government reported that the nation added 225,000 positions in January. That was well above the consensus forecast, which had earlier in the week called for 158,000 new positions. In a separate survey, the jobless rate ticked up from 3.5% to 3.6%. But that was largely because more Americans had resumed looking for employment, as affirmed by an increase in the labor force participation rate from 63.2% to 63.4%. That is the highest rate for this category since June of 2013. Also average hourly wages ticked up to a 12-month gain of 3.1%. That, too, was above the consensus forecast of 3.0%.
Taken together, this was an upbeat report that helped to pare the earlier losses in the equity futures, and now with the futures off just slightly, the Street would seemed positioned to possibly run the table of increases for major indexes for the week. Stay tuned. – Harvey S. Katz