Stocks Recover From Initial Weakness To Close Firmly Positive - U.S. Commentary

(RTTNews) - After initially moving to the downside, stocks showed a significant rebound over the course of the trading session on Friday. Traders seemed to go bargain hunting after the release of disappointing monthly jobs data initially weighed on the markets.

The major average ended the day firmly positive, at or near their highs for the session. The Dow advanced 79.92 points or 0.5 percent to 17,740.63, the Nasdaq climbed 19.06 points or 0.4 percent to 4,736.16 and the S&P 500 rose 6.51 points or 0.3 percent to 2,057.14.

The turnaround by stocks came even though the Labor Department released a report this morning showing much weaker than expected job growth in the month of April.

The report said non-farm payroll employment rose by 160,000 jobs in April compared to economist estimates for a jump of about 200,000 jobs.

Revised data also showed that employment in February and March increased by 233,000 jobs and 208,000 jobs, respectively, reflecting a net downward revision of 19,000 jobs.

The Labor Department also said the unemployment rate held at 5.0 percent in April, unchanged from the previous month. The rate had been expected to edge down to 4.9 percent.

Meanwhile, the report also showed that average hourly employee earnings rose by $0.08 or 0.3 percent to $25.53 in April.

The annual rate of growth in average hourly earnings subsequently accelerated to 2.5 percent in April from 2.3 percent in March.

The weaker than expected job growth added to concerns about the strength of the economy, although the data also led to speculation the Federal Reserve will further delay raising interest rates.

Chris Low, chief economist at FTN Financial, said, "Given Yellen's cautious nature, wait and see is likely what the FOMC will do in June if the May report is weak, but there's a whole month to get through before we find out."

"For the time being, consider the odds of a June hike reduced, but only marginally. Not that they were ever all that high to begin with," he added.

Stocks seemed to benefit from the belief that the markets were oversold, as the Nasdaq rebounded after hitting its lowest intraday level in almost two months. The Dow and the S&P 500 also hit their worst levels in about a month.

Sector News

Gold stocks showed a substantial move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 4.4 percent. The index continued to regain ground following the pullback seen earlier this week.

The strength among gold stocks came amid a sharp increase by the price of the precious metal, with gold for June delivery jumping $21.70 to $1,294 an ounce.

Regaining ground following recent weakness, trucking stocks also saw significant strength. The Dow Jones Trucking Index surged up by 2 percent, bouncing off the nearly two-month closing low set on Thursday.

Steel, networking, and commercial real estate stocks also moved notably higher, contributing to the turnaround shown by the broader markets.

On the other hand, considerable weakness remained visible among airline stocks, as reflected by the 1.3 percent loss posted by the NYSE Arca Airline Index. With the drop, the index fell to a two-month closing low.

Copa Airlines parent Copa Holdings (CPA) posted a particularly steep loss despite reporting better than expected first quarter results.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index fell by 0.3 percent, while Hong Kong's Hang Seng Index slumped by 1.7 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the French CAC 40 Index dropped by 0.4 percent, the German DAX Index and the U.K.'s FTSE 100 Index edged up by 0.2 percent and 0.1 percent, respectively.

In the bond market, treasuries turned lower over the course of the session after failing to sustain an initial upward move. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.2 basis points to 1.779 percent.

Looking Ahead

Following the slew of U.S. economic data released over the past week, the economic calendar for next week is relatively quiet.

Nonetheless, traders are likely to keep a close eye on reports on retail sales and producer prices due to be released next Friday.

Earnings news from companies such as Disney (DIS), Tyson Foods (TSN), Nokia (NOK), Macy's (M), Wendy's (WEN), and J.C. Penney (JCP) may also attract attention next week.