Stocks Close Modestly Higher Despite Disappointing Jobs Data - U.S. Commentary

(RTTNews) - Stocks moved modestly higher during trading on Friday despite the release of disappointing monthly jobs data. Buying interest was somewhat subdued, although the tech-heavy Nasdaq still reached another new record closing high.

The major averages ended the day in positive territory but off their best levels. The Dow edged up 39.46 points or 0.2 percent to 21,987.56, the Nasdaq inched up 6.67 points or 0.1 percent to 6,435.33 and the S&P 500 ticked up 4.90 points or 0.2 percent to 2,476.55.

For the week, the Dow advanced by 0.8 percent, while the Nasdaq surged up by 2.5 percent and the S&P 500 jumped by 1.4 percent.

The modest strength on Wall Street came even though the Labor Department released a report showing much weaker than expected job growth in the month of August.

The Labor Department said non-farm payroll employment climbed by 156,000 jobs in August compared to expectations for an increase of about 180,000 jobs.

The report also said the job growth in June and July was downwardly revised to 210,000 jobs and 189,000 jobs, respectively, reflecting a net downward revision of 41,000 jobs.

Reflecting the weaker than expected job growth, the unemployment rate inched up to 4.4 percent in August from 4.3 percent in July. Economists had expected the unemployment rate to remain unchanged.

Traders may have been comforted by analyst comments suggesting the weak job growth is not likely the beginning of a trend.

"With the survey evidence still strong and third-quarter economic growth on course for another decent gain after the second, there is no reason to believe that the modest drop-off in employment growth is the start of a more serious downturn," said Paul Ashworth, chief U.S. economist at Capital Economics.

He added, "Nevertheless, since the September figures could be affected by Hurricane Harvey, the Fed might be waiting until the October data are released in early November before confirming that the labor market remains in good health."

A separate report from the Institute for Supply Management also showed activity in the manufacturing sector expanded faster than estimated in the month of August.

The ISM said its purchasing managers index climbed to 58.8 in August from 56.3 in July, with a reading above 50 indicating growth in the manufacturing sector. Economists had expected the index to inch up to 56.5.

The bigger than expected increase lifted the purchasing managers index to its highest level since reaching 59.1 in April of 2011.

Sector News

Steel stocks showed a substantial move to the upside on the day, driving the NYSE Arca Steel Index up by 2.1 percent. With the gain, the index reached its best closing level in well over five months.

The rally by steel stocks may have reflected optimism about the outlook for demand following a recent strength of upbeat manufacturing data from around the globe.

Considerable strength was also visible among energy stocks, which moved higher amid a modest increase by the price of crude oil. Crude for October delivery inched up $0.06 to $47.29 a barrel.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index jumped by 1.5 percent, while the NYSE Arca Natural Gas Index and the NYSE Arca Oil & Gas Index climbed by 1.2 percent and 1 percent, respectively.

Airline, biotechnology and banking stocks also saw some strength on the day, although buying interest was somewhat subdued.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index and China's Shanghai Composite Index both rose by 0.2 percent, although Hong Kong's Hang Seng Index bucked the uptrend and edged down by 0.1 percent.

The major European markets all moved to the upside on the day. While the U.K.'s FTSE 100 Index inched up by 0.1 percent, the French CAC 40 Index and the German DAX Index both climbed by 0.7 percent.

In the bond market, treasuries turned lower over the course of the session after seeing initial strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.6 basis points to 2.157 percent.

Looking Ahead

Following the long holiday weekend, next week's trading may be impacted by reports on service sector activity, international trade, and factory orders.

The Fed is also scheduled to release its Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts.