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

(RTTNews) - After opening lower, stocks showed a substantial move to the upside over the course of the trading session on Friday. The major averages all moved sharply higher, with the Dow continuing to recover after hitting its lowest intraday level in a month on Thursday.

The major averages pulled back off their best levels in the final hour of trading but held on to significant gains. The Dow surged up 332.36 points or 1.4 percent to 24,262.51, the Nasdaq soared 121.47 points or 1.7 percent to 7,209.63 and the S&P 500 jumped 33.69 points or 1.3 percent to 2,663.42.

Even with the strong upward move on the day, the major averages turned in a mixed performance on the day. The Nasdaq shot up by 1.3 percent, but the Dow and the S&P 500 both edged down by 0.2 percent.

The rally on Wall Street partly reflected a positive reaction to the Labor Department's closely watched monthly employment report.

While the report showed weaker than expected job growth in the month of April, the unemployment rate fell to its lowest level in over seventeen years.

The Labor Department said non-farm payroll employment climbed by 164,000 jobs in April compared to economist estimates for an increase of about 192,000 jobs.

The shortfall compared to economist estimates was largely offset by an upward revision to the job growth in March, with employment rising by 135,000 jobs compared to the addition of 103,000 jobs originally reported.

Meanwhile, the report said the unemployment rate fell to 3.9 percent in April after holding at 4.1 percent for six straight months. The unemployment rate had been expected to edge down to 4.0 percent.

With the bigger than expected decrease, the unemployment rate dropped to its lowest level since a matching rate in December of 2000.

The drop in the unemployment rate was primarily due to a decrease in the size of the labor force, however, as the labor force shrank by 236,000 people compared to the 3,000 person uptick in the household survey measure of employment

Compared to the same month a year, average hourly earnings were up by 2.6 percent in April, unchanged compared to the revised growth seen in March.

James Knightley, Chief International Economist at ING, said, "It isn't a particularly exciting report and certainly shouldn't alter market expectations for monetary policy in any meaningful way."

"Other surveys paint a stronger picture and we still believe that the wage story will turn higher and be the catalyst for the Fed to take a more aggressive stance on the inflation threat," he added.

Sector News

Telecom stocks turned in some of the market's best performances, resulting in a 2.8 percent spike by the NYSE Arca Telecom Index.

With the jump on the day, the telecom index continued to recover from the six-month closing low it set on Wednesday.

Significant strength was also visible among computer hardware stocks, as reflected by the 2.3 percent gain posted by the NYSE Arca Computer Hardware Index.

Apple (AAPL) led the hardware sector higher on news billionaire investor Warren Buffett bought 75 million shares of the tech giant in the first quarter.

Energy stocks also saw considerable strength, benefiting from a sharp increase by the price of crude oil. Crude for June delivery surged up $1.29 to $69.72 a barrel.

Semiconductor, biotechnology, and chemical stocks also moved notably higher on the day, reflecting broad based buying interest on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday, with the Japanese markets still closed for a holiday. Hong Kong's Hang Seng Index slumped by 1.3 percent, while Australia's S&P/ASX 200 Index fell by 0.6 percent.

Meanwhile, the major European markets moved to the upside on the day. While the French CAC 40 Index rose by 0.3 percent, the U.K.'s FTSE 100 Index advanced by 0.9 percent and the German DAX Index jumped by 1 percent.

In the bond market, treasuries showed a lack of direction over the course of the session before closing roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 2.944 percent.

Looking Ahead

The economic calendar for next week is relatively light compared to the slew of data released over the past week, although reports on producer and consumer prices are still likely to attract considerable attention.

Earnings news is also likely to remain in focus next week, with Tyson Foods (TSN), Electronic Arts (EA), Wendy's (WEN), Groupon (GRPN), Office Depot (ODP), Hostess Brands (TWNK), Nvidia (NVDA), and Yelp (YELP) among the companies due to report their quarterly results.