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

(RTTNews) - Stocks moved sharply higher over the course of the trading day on Friday, adding to the moderate gains posted in the previous session. With the strength on the day, the Dow reached its best closing level in well over two months.

After showing a strong move to the upside in early trading, the major averages remained firmly positive throughout the session. The Dow soared 267.05 points or 1.5 percent to 18,191.11, the Nasdaq jumped 58.00 points or 1.2 percent to 5,003.55 and the S&P 500 surged up 28.10 points or 1.4 percent to 2,116.10.

For the week, the Dow advanced by 0.9 percent and the S&P 500 rose by 0.4 percent, while the Nasdaq edged slightly lower.

The rally on Wall Street largely reflected a positive reaction to the Labor Department's highly anticipated monthly jobs report from April.

The jobs data was seen as solid but not strong enough to put a June interest rate hike by the Federal Reserve back on the table.

The report said non-farm payroll employment increased by 223,000 jobs in April compared to economist estimates for an increase of about 220,000 jobs.

However, the Labor Department also said the increase in employment in March was downwardly revised to 85,000 jobs from the previously reported 126,000 jobs.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said the downward revision took the gloss off the rebound in payrolls in April.

"We may see a further acceleration in employment growth going into the summer, but this isn't the sort of unequivocal rebound that would give the Fed the confidence to begin tightening monetary policy before Independence Day," Ashworth said.

The unemployment still edged down to 5.4 percent in April from 5.5 percent in March, matching economist estimates. The drop pulled the unemployment rate down to its lowest level since May of 2008.

The positive sentiment on Wall Street also came amid a rally by European stocks, which moved higher due in part to news the Conservatives won a surprise victory in the general elections in the U.K.

Sector News

Most of the major sectors moved to the upside on the day, reflecting the broad based buying interest generated in reaction to the jobs report.

Natural gas stocks posted particularly strong gains, driving the NYSE Arca Natural Gas Index up by 2.6 percent. The gain by the index came after it pulled back sharply over the three previous sessions, hitting its lowest levels in almost a month.

The rebound by natural gas stocks came amid a notable increase by the price of the commodity, as natural gas for June delivery climbed $0.146 to $2.88 per million BTUs.

Significant strength was also visible among biotechnology stocks, as reflected by the 2.6 percent gain posted by the NYSE Arca Biotechnology Index. Biogen (BIIB) posted a standout gain after announcing a $5 billion share repurchase program.

Oil service stocks also turned in a strong performance on the day, moving higher along with the price of crude oil. With crude for June delivery rising $0.45 to $59.39 a barrel, the Philadelphia Oil Service Index jumped 2.2 percent.

Networking, tobacco, pharmaceutical, and chemical stocks also moved notably higher, contributing to the broad based rally.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index rose by 0.5 percent, while Hong Kong's Hang Seng Index surged up by 1.1 percent.

The major European markets also moved notably higher on the day. While the U.K.'s FTSE 100 Index jumped by 2.3 percent, the French CAC 40 Index and the German DAX Index soared by 2.5 percent and 2.7 percent, respectively.

In the bond market, treasuries continued to recover from the recent sell-off but closed well off their best levels. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.4 basis points to 2.15 percent.

Looking Ahead

Economic data may remain in focus next week, with traders likely to keep an eye on reports on retail sales, producer prices, and industrial production.

On the earnings front, Cisco Systems (CSCO), Dish Network (DISH), Macy's (M), and Applied Materials (AMAT) are among the companies due to report their quarterly results next week.