Stocks Rebound From Yesterday's Sell-Off After Jobs Data - U.S. Commentary

(RTTNews) - Following the sell-off seen in the previous session, stocks showed a substantial move back to the upside during trading on Friday. The gains more than offset Thursday's losses, although the major averages still closed shy of Tuesday's highs.

The major averages moved roughly sideways going into the close, hovering near their best levels of the day. The Dow soared 369.96 points or 2.1 percent to 17,847.63, the Nasdaq jumped 104.74 points or 2.1 percent to 5,142.27 and the S&P 500 surged up 42.07 points or 2.1 percent to 2,091.69.

With the gains on the day, the major averages moved modestly higher for the week. The Nasdaq rose by 0.3 percent, while the Dow and the S&P 500 edged up by 0.2 percent and 0.1 percent, respectively.

The rally on Wall Street was partly due to bargain hunting on the heels of the recent weakness, which came amid concerns about the outlook for monetary policy.

Traders also reacted positively to a Labor Department report showing stronger than expected job growth in the month of November.

The report said non-farm payroll employment jumped by 211,000 jobs in November compared to economist estimates for an increase of about 190,000 jobs.

Job growth in September and October was also upwardly revised to 145,000 jobs and 298,000 jobs, respectively, reflecting 35,000 more jobs than previously reported.

The Labor Department also said the unemployment rate held at the more than seven-year low of 5.0 percent set in the previous month, matching expectations.

The stronger than expected job growth further cemented expectations the Federal Reserve will raise interest rates later this month, although the pace of monetary policy normalization is expected to be gradual.

Joel L. Naroff, President and Chief Economist at Naroff Economic Advisors, said, "There really is nothing except a major crisis that will stop the Fed from its appointed first round of rate hikes."

"All it would have taken is a mediocre employment report to provide the necessary cover to raise rates and the November data were more than that," he added.

A separate report from the Commerce Department showed that the U.S. trade deficit unexpectedly widened in October, as exports fell at a faster rate than imports.

Buying interest was also attributed to remarks by European Central Bank President Mario Draghi, who said he sees no limit to how the bank can use its tools. He also said the ECB is prepared to intensify its quantitative easing program if necessary.

Draghi contributed to the sell-off seen on Thursday, as traders were disappointed the ECB did not provide more stimulus beyond a modest interest rate cut and an extension of its asset purchase program.

Sector News

While most of the major sectors moved to the upside on the day, gold stocks posted particularly strong gains. The NYSE Arca Gold Bugs Index surged up by 6.2 percent to its best closing level in a month.

The rally by gold stocks came amid a sharp increase by the price of the precious metal, as gold for February delivery jumped $22.90 to $1,084.10 an ounce.

Banking stocks also saw considerable strength on the day, resulting in a 2.8 percent gain by the Dow Jones Banks Index. Northern Trust (NTRS), SunTrust (STI) and KeyCorp (KEY) posted standout gains.

Significant strength was also visible among software stocks, as reflected by the 2.7 percent gain posted by the Dow Jones Software Index. With the gain, the index reached a fifteen-year closing high.

Biotechnology, health care, networking, and airline stocks also saw notable strength, while energy stocks came under pressure amid a steep drop by the price of crude oil.

Other Markets

In overseas trading, stock markets across the Asia-Pacific joined the global sell-off during trading on Friday. Japan's Nikkei 225 Index plunged by 2.2 percent, while Hong Kong's Hang Seng Index dropped by 0.8 percent.

The major European markets also saw some weakness on the day. While the U.K.'s FTSE 100 Index fell by 0.6 percent, the French CAC 40 Index and the German DAX Index both dipped by 0.3 percent.

In the bond market, treasuries regained ground following the sell-off seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.5 basis points to 2.275 percent.

Looking Ahead

The economic calendar for next week starts off relatively quiet, although reports on producer prices and retail sales are likely to attract attention later in the week.