Stocks Close Modestly Higher After Seeing Early Weakness - U.S. Commentary

(RTTNews) - After moving modestly lower in early trading, stocks showed a notable rebound over the course of the trading day on Friday. The major averages climbed well off their early lows, eventually ending the day in positive territory.

The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow edged up 30.34 points or 0.2 percent to 15,658.36, the Nasdaq climbed 13.84 points or 0.4 percent to 3,689.59 and the S&P 500 inched up 2.80 points or 0.2 percent to 1,709.67.

With the gains on the day, the major averages all moved higher for the week, with the Dow and the S&P 500 reaching new record highs. The Nasdaq surged up 2.1 percent for the week to a nearly thirteen-year closing high, while the Dow rose by 0.6 percent and the S&P 500 advanced by 1.1 percent.

The turnaround that was seen over the course of the trading session came as traders digested the Labor Department's closely watched monthly jobs report.

Before the start of trading, the Labor Department said non-farm payroll employment increased by 162,000 jobs in July following a downwardly revised increase of 188,000 jobs in June.

Economists had expected employment to increase by about 175,000 jobs compared to the addition of 195,000 jobs originally reported for the previous month.

Despite the weaker than expected job growth, however, the unemployment rate dipped to 7.4 percent in July, hitting its lowest level since December of 2008.

While the data initially generated some negative sentiment, the rebound by stocks suggests that the disappointing job growth generated some optimism that the Federal Reserve may postpone its plans to begin scaling back its bond purchasing program.

Commenting on the impact of the report, Sal Guatieri, Senior Economist at BMO Capital Markets, said, "While we still lean toward the Fed announcing a tapering of asset purchases in September, we will need to see a good bounce in August employment and in the economic data to get there."

"Although the unemployment rate has moved lower, the recent economic softness will raise doubts among policymakers about whether this progress can be sustained," he added.

The jobs report largely overshadowed separate Commerce Department reports showing a bigger than expected increase in personal spending and a smaller than expected increase in factory orders in June.

Sector News

Telecom stocks showed a strong move to the upside over the course of the trading day, driving the NYSE Arca Telecom Index up by 1.6 percent. The gain extended a recent upward move by the index, which reached a five-year closing high.

Sprint (S) helped to lead the telecom sector higher, with the wireless and wireline communications services provider jumping by 4.6 percent.

Considerable strength also emerged among housing stocks, as reflected by the 1.3 percent gain posted by the Philadelphia Housing Sector Index. Ryland Group (RYL) and Toll Brothers (TOL) turned in two of the sector's best performances.

Meanwhile, gold stocks came under pressure on the day, dragging the NYSE Arca Gold Bugs Index down by 2.4 percent. The sharp drop by gold stocks came even though the price of the precious metal ended the day nearly flat.

Trucking stocks also saw significant weakness, giving back some ground after ending the previous session sharply higher. The Dow Jones Trucking Index fell by 1.2 percent after jumping 3.8 percent to a record closing high on Thursday.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index surged up by 3.3 percent, while Hong Kong's Hang Seng Index ended the day up by 0.5 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the French CAC 40 Index inched up by 0.1 percent, the German DAX Index edged down by 0.1 percent and the U.K.'s FTSE 100 Index fell by 0.5 percent.

In the bond market, treasuries showed a substantial rebound after ending the previous session sharply lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, plunged 12.1 basis points to 2.602 percent.

Looking Ahead

Following the slew of market-moving events over the past week, the calendar for next week is relatively quiet. Nonetheless, traders are likely to keep an eye on reports on service sector activity, international trade, and weekly jobless claims.

On the earnings front, Disney (DIS), Tyson Foods (TSN), Dish Network (DISH), Marathon Oil (MRO), and Time Warner (TWX) are among the companies due to release their quarterly results next week.