Stocks Close Sharply Higher Following Upbeat Jobs Data - U.S. Commentary

(RTTNews) - With traders reacting positively to the closely watched monthly jobs report, stocks moved sharply higher during trading on Friday. The strong upward move on the day lifted the S&P 500 to just shy of its record closing high set in May of 2015.

The major averages finished the session firmly in positive territory, near their best levels of the day. The Dow jumped 250.86 points or 1.4 percent to 18,146.74, the Nasdaq spiked 79.95 points or 1.6 percent to 4,956.76 and the S&P 500 surged up 32.00 points or 1.5 percent to 2,129.90.

For the holiday-shortened week, the Nasdaq soared by 1.9 percent, while the S&P 500 and the Dow shot up by 1.3 percent and 1.1 percent, respectively.

The rally 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 June.

The report said non-farm payroll employment surged up by 287,000 jobs in June versus economist estimates for an increase of about 180,000 jobs.

However, the Labor Department also said the uptick in jobs in May was downwardly revised to just 11,000 from the 38,000 originally reported.

The weak job growth in May was partly due to a since-resolved strike by Verizon (VZ) workers, which contributed to the loss of 39,000 jobs in the information sector.

While the report also said the unemployment rate rose to 4.9 percent in June from 4.7 percent in May, the increase primarily reflected a rebound in the number of people in the labor force.

On the wage front, the Labor Department said average hourly employee earnings rose by $0.02 to $25.61 in June after rising by $0.06 in May.

Compared to the same month a year ago, average hourly earnings have risen by 2.6 percent, reflecting the strongest wage growth this year.

Andrew Hunter, Assistant Economist at Capital Economics, said the strong job growth in June suggests the sharp slowdown in the preceding months was nothing more than a blip.

"Fed officials will want to see evidence of a more sustained recovery in employment growth over July and August as well, but this nonetheless supports our view that the next hike could still be in September," Hunter said.

The Federal Reserve is scheduled to hold its next policy meeting later this month, but most analysts expect the central bank to remain on hold following Britain's recent vote to leave the European Union.

Sector News

Amid the broad based rally on Wall Street, steel stocks showed a particularly strong move to the upside on the day. The NYSE Arca Steel Index surged up by 3.8 percent to its best closing level in two months.

Brazil's CSN (SID), L.B. Foster (FSTR), and ArcelorMittal (MT) turned in some of steel sector's best performances on the day.

Substantial strength was also visible among networking stocks, as reflected by the 3.7 percent gain posted by the NYSE Arca Networking Index.

Within the networking sector, Polycom (PLCM) posted a standout gain after ending its merger agreement with Mitel Networks and entering into an agreement to be acquired by Siris Capital Group for $2 billion.

Gold stocks also saw considerable strength on the day, resulting in a 2.8 percent jump by the NYSE Arca Gold Bugs Index. The strength in the sector came despite a decrease by the price of gold.

Semiconductor, chemical, transportation, and housing stocks also showed notable moves to the upside, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index slumped by 1.1 percent, while Hong Kong's Hang Seng Index slid by 0.7 percent.

Meanwhile, the major European markets showed notable moves to the upside on the day. While the U.K.'s FTSE 100 Index advanced by 0.9 percent, the French CAC 40 Index jumped by 1.8 percent and the German DAX Index surged up by 2.2 percent.

In the bond market, treasuries moved to the upside going into the close after showing a lack of direction for much of the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.1 basis points to 1.366 percent.

Looking Ahead

The economic calendar for next week starts off relatively quiet but picks up as the week progresses and culminates with a slew of data next Friday.

Traders are likely to keep an eye on reports on retail sales, industrial production and producer and consumer price inflation.