After The Close - A generally decent, but not compelling, jobs report helped move stocks higher at the start of today’s session, but sentiment quickly soured following the latest development on the U.S./Iran front.
The Labor Department announced that employers added 145,000 jobs in December, coming in a bit shy of expectations. Also, the surprisingly strong showing in November was revised to 256,000 (down from 266,000).
Meanwhile, unemployment held at 3.5%, while annual average hourly wage growth slowed to 2.9% from 3.1%. The boost provided by the report proved to be short-lived however, as stocks retreated after Treasury Secretary Steven Mnuchin announced new sanctions on Iran. The move followed recent missile strikes on U.S. bases in Iraq, and raised fears that the ongoing conflict between the two nations would escalate.
After briefly crossing the 29,000 mark for the first time, the Dow Jones Industrial Average failed to recover from the mid-day slump, and then selling accelerated in late afternoon trading. Altogether, the 30-stock index ended the session down 133 points. The broader S&P 500 fared a bit better, shedding nine points, while the tech-heavy NASDAQ was down by 24 points. Performance among the 10 major market sectors was mostly negative. Energy shares took the biggest hit, losing more than three-quarters of a percentage point, while consumer cyclicals and industrials were down more than half a percent. Relative safe-haven utility stocks posted a small gain on the session.
Elsewhere, oil also lost ground, with light sweet crude down 0.6% percent, to around $59.20 a barrel. Prices retreated after spiking higher earlier in the week as tensions in the Middle East flared, but are still up about 13% from where they were a year ago.
The mood was also negative on the European bourses today, as a positive start quickly gave way to selling pressure. The bulls tried to make a comeback as the session wore on, but the U.K.’s FTSE 100, Germany’s DAX and France’s CAC 40 all ended the day with small losses. – 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 - The stock market, up strongly on Wednesday on decreased military tensions between the United States and Iran, surged out of the starting gate yesterday, as well, buoyed by the continued belief that the two warring parties would contain their feud to a degree. As such, the Dow Jones Industrial Average sprinted out to an all-time record high early on, gaining more than 180 points within the first hour of trading and getting ever closer to the 29,000 mark. Records also were set by the S&P 500 Index and the NASDAQ. To be sure, there are lingering concerns about a longer-term reduction in global tensions. But for now, the news seems reassuring.
Leading the way higher once more were shares of Dow component Apple (AAPL – Free Apple Stock Report), which soared by another $6.00, rising still further above $300. Remarks by the President in which he said he wanted both sides in the Middle East to negotiate a deal and the lack of casualties in the earlier attack on a U.S. airbase combined to raise the level of confidence on our shores. A better reading on weekly jobless claims also emboldened the bulls. A far more critical jobs release was just issued by the Labor Department, as it reported non-farm payroll for December and the unemployment rate for that month (see below).
Meantime, not all the arrows were green, as a pair of retailers saw their stocks falter badly yesterday. To wit, shares of Kohl's (KSS) fell back sharply after the chain issued fiscal 2019 guidance that was short of expectations. One other name in that category faring poorly was Bed Bath & Beyond (BBBY). That issued tumbled almost 20% on word that it was delaying the closure of some stores until he coming fiscal year. Overall, though, the news remained constructive and the market continued to track higher through the morning and into the early afternoon, although there was some modest selling around midday.
But stocks soon regained the upper hand again and started to once more drift higher, with the gain in the Dow of more than 200 points. That strength would then persist through the afternoon, with nary a setback along the way. Whatever nervousness there was ahead of the jobs release was not evident in mid-afternoon trading. The strength then would carry into the close, with the final advance in the Dow bringing it to within some 45 points of 29,000. In all, that composite would add 212 points. The S&P 500 Index, meantime, with its 22-point advance, is closing in on 3,300. Finally, the NASDAQ, up 74 points, has ascended 92,000.
Looking ahead to a new day now, and watching for the latest news on the international front, we see that the employment report, issued just moments ago, indicated that the nation had added 145,000 jobs in December; expectations had been for an increase of 150,000 jobs. In November, the job creation figure was 256,000, which was 10,000 lower than the initially estimated jobs gain of 266,000. Employment also was revised lower by 4,000 for October. Meantime, the unemployment rate held steady at 3.5%. A year ago, the jobless rate was 3.9%.
In other aspects of the report, the labor-force participation rate held steady at 63.2%, while average hourly wages, which had been increasing briskly, edged up by just $0.03 in December. Taken together, this was a somewhat disappointing jobs issuance, but was rather consistent with the in and out character of the aging business expansion at this time. As for the reaction on Wall Street, it was muted and we would look for the market to open modestly to the upside when trading resumes in a matter of minutes. Going forward, we sense that any news with regard to Iran will be the deciding factor on how stocks perform today. - Harvey S. Katz, CFA