Before The Bell - Stock futures on Friday are pointing to an uninspired open, following disappointing job gains noted in the Labor Department’s monthly employment report. Only 194,000 positions were added, versus an expectation of close to 500,000. On the plus side, wage gains were better than expected, and the unemployment rate fell to 4.8% from 5.2%.
The data follows positive labor market news earlier in the week. An Automated Data Processing (ADP) payroll report showed 568,000 private sector jobs added in September and the Labor Department separately reported a drop in initial weekly unemployment claims.
On Thursday, word that an agreement in Washington to extend the debt ceiling into December was close to being reached provided the green light for bargain hunters. Investors have had to deal with a number of thorny issues lately, but there is no playbook on what to do if the United States were to default on its obligations.
It is not a question of credit availability, but rather an administrative procedure needing approval from Congress. The short-term deal on the table was greeted with a sigh of relief, although more high-stakes wrangling could be in store down the road.
As it turned out, the good—for now—news on a debt deal drove the Dow Jones Industrial Average up 338 points, while the S&P 500 jumped 36 points and the NASDAQ climbed 152 points. Market breadth was strongly positive, with advancers topping decliners by a wide margin on both the New York Stock Exchange and the NASDAQ. Stocks finished off of their best levels of the session, though, hinting at a degree of ongoing cautiousness.
Most of the stock market’s major sectors perked up nicely, with the exception of the defensive utilities group. The consumer cyclical and basic materials sectors fared the best, and energy-related shares continued to benefit from rising oil prices. Domestic crude oil advanced to $78.30 a barrel, up $0.87, in New York trading. Tight inventories of oil and natural gas could provide a springboard for further energy sector gains, particularly if the coming winter experiences seasonally cold temperatures.
Meantime, the yield on the 10-year Treasury note rose to 1.57% from 1.52%, with prices moving in the opposite direction. The trend toward higher yields in recent weeks has come about partly as the Federal Reserve has signaled that it may well slow its asset purchases in the months ahead. The pickup in long-term yields is proving a plus for shares of the big banks, which stand to benefit from improved asset yields.
The nation’s leading banks will also kick off third-quarter earnings season, beginning next week, for which the preliminary view is mostly optimistic. - Robert Mitkowski