Upbeat Jobs Data Leads To Modest Strength On Wall Street - U.S. Commentary

(RTTNews) - Despite some late-day volatility, stocks managed to end Friday's trading mostly higher in reaction to upbeat employment data. The gains on the day more than offset the modest weakness seen in the previous session, lifting the Dow and the S&P 500 to new record highs.

The major averages ended the day modestly higher but well off their best levels. The Dow rose 58.69 points or 0.3 percent to 17,958.79, the Nasdaq inched up 11.32 points or 0.2 percent to 4,780.76 and the S&P 500 climbed 3.45 points or 0.2 percent to 2,075.37.

Nonetheless, the major averages turned in a mixed performance for the week. While the Nasdaq edged down by 0.2 percent, the Dow advanced by 0.7 percent and the S&P 500 rose by 0.4 percent.

The strength on Wall Street came following the release of a report from the Labor Department showing much stronger than expected job growth in the month of November.

The report said non-farm payroll employment surged up by 321,000 jobs in November compared to economist estimates for an increase of about 230,000 jobs. The increase reflected the strongest monthly job creation since January of 2012.

The Labor Department also said the job gains in September and October were upwardly revised to 271,000 and 243,000, respectively, reflecting a net upward revision of 44,000 jobs.

However, while the report paints a positive picture of the employment situation in the U.S., the data also raised concerns about the outlook for interest rates.

Peter Boockvar, managing director at the Lindsey Group, said, "Bottom line, how could the Fed with a straight face keep rates at zero in the face of strong job growth and now the possibility of wage inflation?"

"They can't and it's why the two-year note yield is spiking by 7 basis points to the highest since April 2011," he added. "We reiterate a March rate hike and now maybe sooner and markets need to adjust to this reality."

The monthly jobs report largely overshadowed a report from the Commerce Department showing that the U.S. trade deficit narrowed in October but still came in wider than expected.

The Commerce Department said the trade deficit narrowed to $43.4 billion in October from a revised $43.6 billion in September, while economists had expected the deficit to narrow to $41.0 billion.

A separate report from the Commerce Department said factory orders fell by 0.7 percent in October compared to expectations for a 0.3 percent decrease.

Sector News

Electronic storage stocks turned in some of the market's best performances on the day, resulting in a 2 percent gain by the NYSE Arca Disk Drive Index. With the gain, the index reached its best closing level in over three years.

Quantum (QTM) and Hutchinson Technology (HTCH) posted standout gains within the storage sector, jumping by 7.1 percent and 5.7 percent, respectively.

Banking and brokerage stocks also saw significant strength on the heels of the upbeat jobs data, with the Dow Jones Banks Index and the NYSE Arca Broker/Dealer Index climbing by 1.8 percent and 1.6 percent, respectively.

Adding to the strong gains posted in the previous session, airline stocks also moved notably higher on the day. The NYSE Arca Airline Index rose by 1.2 percent to its best closing level in over twelve years.

On the other hand, gold stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 2.6 percent. The weakness in the sector came as gold for February delivery tumbled $17.30 to $1,190.40 an ounce.

Energy stocks also moved lower along with the price of crude oil, while interest rate sensitive utilities stocks also saw some weakness.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index inched up by 0.2 percent, while Hong Kong's Hang Seng Index advanced by 0.7 percent.

The major European markets also moved to the upside on the day. While the U.K.'s FTSE 100 Index surged up by 1 percent, the French CAC 40 Index and the German DAX Index soared by 2.2 percent and 2.4 percent, respectively.

In the bond market, treasuries came under pressure on the heels of the upbeat jobs data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped by 5 basis points to 2.307 percent.

Looking Ahead

While the economic calendar for next week is relatively light, traders are likely to keep a close eye on reports on weekly jobless claims, retail sales, and producer price inflation.

On the earnings front, H&R Block (HRB), Pep Boys (PBY), AutoZone (AZO), RadioShack (RSH), Costco (COST), Toll Brothers (TOL), Ciena (CIEN), and Adobe (ADBE) are among the companies due to report their quarterly results next week.