Positive Reaction To Jobs Data Leads To Gains On Wall Street - U.S. Commentary

(RTTNews) - After seeing significant strength early in the session on Friday, stocks gave back some ground as the day progressed but managed to close mostly higher. The gains on the day reflected a positive reaction to the closely watched monthly jobs report.

The major averages ended the day in positive territory but well off their highs for the session. The Dow rose 72.66 points or 0.4 percent to 18,491.96, the Nasdaq increased 22.69 points or 0.4 percent to 5,249.90 and the S&P 500 climbed 9.12 points or 0.4 percent to 2,179.98.

With the upward move on the day, the major averages managed to close higher for the week. While the Nasdaq advanced by 0.6 percent, the Dow and the S&P 500 both rose by 0.5 percent.

The strength on Wall Street came following the release of a report from the Labor Department showing weaker than expected job growth in the month of August.

The Labor Department said non-farm payroll employment climbed by 151,000 jobs in August after surging up by an upwardly revised 275,000 jobs in July.

Economists had expected an increase of about 175,000 jobs compared to the jump of 255,000 jobs originally reported for the previous month.

The report also said the unemployment rate held at 4.9 percent in August, unchanged from the previous month. The unemployment rate had been expected to edge down to 4.8 percent.

While the data was somewhat disappointing, analysts suggested the report will lead the Federal Reserve to refrain from raising interest rates at its next meeting later this month.

"The report doesn't support the case for a September rate hike," said ING Senior Economist James Knightley. "After all inflation pressures are very benign and the U.S. election has the potential to weigh on sentiment and activity a touch."

He added, "On the other hand, an increasing number of Fed speakers have suggested that they are comfortable to hike rates despite relatively subdued employment growth meaning a December move should not be ruled out."

Last week, Fed Chair Janet Yellen said she believes the case for raising rates has strengthened in recent months but stressed that policy decisions always depend on the degree to which incoming data continues to confirm the central bank's outlook.

A separate report from the Commerce Department showed that the U.S. trade deficit narrowed by much more than expected in July amid an increase in the value of exports and a decrease in the value of imports.

The Commerce Department said the trade deficit narrowed to $39.5 billion in July from a revised $44.7 billion in June. Economists had expected the deficit to narrow to $41.3 billion.

Sector News

After rebounding sharply in the previous session, gold stocks continued to regain ground during trading on Friday. The NYSE Arca Gold Bugs Index surged up by 3.6 percent, climbing further off the two-month closing low it set on Wednesday.

The strength among gold stocks came amid an increase by the price of the precious metal, with gold for December delivery climbing $9.60 to $1,326.70 an ounce.

Energy stocks also showed a strong move to the upside, benefiting from a rebound by the price of crude oil. Crude for October delivery jumped $1.28 to $44.44 a barrel after tumbling $1.54 to $43.16 a barrel on Thursday.

Reflecting the strength in the energy sector, the NYSE Arca Natural Gas Index shot up by 2.1 percent, while the NYSE Arca Oil & Gas Index advanced by 1.4 percent.

Tobacco, steel, telecom, and utilities stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in yet another mixed performance on Friday. Japan's Nikkei 225 Index closed just below the unchanged line, while China's Shanghai Composite Index inched up by 0.1 percent.

Meanwhile, the major European markets all showed strong moves to the upside on the day. While the German DAX Index jumped by 1.4 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index surged up by 2.2 percent and 2.3 percent, respectively.

In the bond market, treasuries climbed well off their lows for the session but still closed in the red. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.6 basis points to 1.596 percent after reaching a high of 1.621 percent.

Looking Ahead

Following the long holiday weekend, next week's trading activity may be somewhat subdued amid a relatively light economic calendar.

Nonetheless, the outcome of the European Central Bank's monetary policy meeting is likely to be in focus along with a report on U.S. service sector activity.

The Fed's Beige Book is also likely to attract attention, as traders continue to try to gauge the likelihood of a near-term interest rate hike.