Investors overlooked weaker-than-expected nonfarm payroll additions to focus on economic strength in the report; helping benchmarks finish in the green on Friday. Unemployment rate dropped to a five-year low and construction sector showed strong gains. Encouraging earnings from Expedia also helped improve the mood. The two days of gains helped benchmarks rebound from losses to end with weekly gains; the first one for S&P 500 in four weeks.
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The Dow Jones Industrial Average (:DJI) jumped more than 165 points, or 1.1%, to close Friday’s trading session at 15,794.08. The Standard & Poor 500 (S&P 500) increased significantly, by 1.3%, to sign off at 1,797.02. The tech-laden Nasdaq Composite Index gained the most among fellow benchmarks rising 1.7% to move up to 4,125.86. The fear-gauge CBOE Volatility Index (:VIX) slumped 11.4%. Total volume on the New York Stock Exchange was 3.78 billion; where for 75% advancers, 22% stocks closed lower.
Friday’s gains, along with the gains the benchmarks scored on Thusrday, helped markets finish in the green for the week. A drop in initial claims and encouraging results from Disney had helped benchmarks achieve their best single-day performance since Dec 18 on Thursday. The combined gains offset benchmarks’ losses last week. The Dow, S&P 500 and Nasdaq were up 0.6%, 0.8% and 0.5%, respectively.
This was S&P 500’s first weekly finish in the green in four weeks. Friday’s gains also helped S&P 500 to move above its 14-day moving average for the first time since Jan 23. The combined gain of 2.6% for Thursday and Friday for S&P 500 was also the best two-day performance in about four months.
Coming to economic data, the U.S. Bureau of Labor Statistics said total nonfarm payroll employment had risen to 113,000 in January. This was well short of the consensus estimate of a jump to 189,000. This was the second-straight month of sub-par labor market performance.
However, investors focused on the other part of the data that showed unemployment rate had fallen to 6.6% now. This is a five-year low, or in other words – another post-recession low. The unemployment rate has now fallen by 0.6% since Oct 2013, which is an unusually fast decline rate for this key measure.
Also, the construction sector added 48,000 jobs over the month, which negated December’s decline of 22,000. The strong showing of the construction sector cheered investors as it suggested cold weather conditions had lesser than expected impact on job creation.
Strong fourth quarter result from Expedia Inc. (NASDAQ:EXPE) also added to the bullish sentiment. The company outpaced estimates for both the top and bottom lines. Also, its 52.2% year-over-year jump in adjusted earnings was the highest in five quarters. Expedia’s shares were up 14.3% on Friday.
Meanwhile, consumer credit increased 7.3% in December. The Federal Reserve reported that total consumer credit had jumped $18.8 billion to $3.1 trillion, the biggest gain in 10 months. The $18.8 billion increase was also decently ahead of the consensus estimate of an increase by $12 billion.
Looking at the sectors, Industrial sector was a major gainer and the Industrial Select Sector SPDRA (XLI) increased 1.7%. Key stocks such as General Electric Company (NYSE:GE), United Technologies Corp. (NYSE:UTX), The Boeing Company (NYSE:BA), Union Pacific Corporation (NYSE:UNP), 3M Company (NYSE:MMM) and Honeywell International Inc. (NYSE:HON) gained 1.0%, 1.2%, 3.6%, 1.0%, 1.1% and 2.2%, respectively.
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Read the analyst report on UTX
Read the analyst report on BA
Read the analyst report on UNP
Read the analyst report on MMM
Read the analyst report on HON
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