Day Traders Diary
Equities notched new records yet again on Friday, advancing for the fourth session in a row.
The Dow Jones Industrial Average climbed 0.9%, the Nasdaq Composite rose 0.8%, and the S&P 500 jumped 0.7%. All three major U.S. indices finished at new record highs, marking the fourth consecutive record finish for the Nasdaq and the S&P 500 and the third consecutive for the Dow. The Russell 2000 (+0.3%) underperformed but still closed at a new all-time high.
Stocks opened Friday a step above Thursday's closing levels and extended gains in the late afternoon, finishing near their best marks of the day.
The top-weighted technology sector (+1.2%) led Friday's rally, moving into the top spot on the 2018 leaderboard. Within the group, Microsoft (MSFT 88.19, +1.08), Alphabet (GOOGL 1110.29, +14.53), and Facebook (FB 186.85, +2.52) hit new all-time highs, adding between 1.2% and 1.4%. Apple (AAPL 175.00, +1.97) climbed 1.1%.
The health care, consumer discretionary, and materials sectors also had solid showings, adding 0.9% apiece, while the five other advancing sectors ended with gains between 0.1% and 0.7%. The energy sector (unch) was the weakest group as crude oil tumbled from a three-year high. West Texas Intermediate crude futures dropped 0.9% to $61.47 per barrel.
Investors received the Employment Situation Report for December on Friday morning. Job growth was weaker than expected, with nonfarm payrolls increasing by 148,000 (Briefing.com consensus +188,000), while average hourly earnings grew 0.3%--which was in line with the Briefing.com consensus.
Rate-hike expectations remained roughly the same following the release; the CME FedWatch Tool projects that the next rate hike will occur at the March FOMC meeting with an implied probability of 68.1%.
In the bond market, U.S. Treasuries sold off on Friday, pushing yields higher across the curve. The yield on the benchmark 10-yr Treasury note jumped to 2.48% after finishing Thursday at 2.45% while the 2-yr yield jumped one basis point to 1.96%.
Elsewhere, the Euro Stoxx 50 (+1.0%) advanced for the third session in a row following an upbeat batch of economic data, which included the November Eurozone PPI (+0.6% actual vs +0.3% consensus) and Germany's November retail sales (+2.3% actual vs +1.1% consensus).
Stocks in the Asia-Pacific region also had a good day with Japan's Nikkei (+0.9%) settling at a 26-year high for the second consecutive day.
Reviewing Friday's economic data, which included the Employment Situation Report for December, the December ISM Services Index, November Factory Orders, and the November Trade Balance:
On Monday, investors will receive just one economic report--November Consumer Credit (Briefing.com consensus $18.0 billion)--which will be released at 3:00 PM ET.
Week In Review: Bang! Off to the Races
The stock market began 2018 with a bang, advancing to new record highs in each of this week's four trading sessions. The Nasdaq Composite jumped 3.4% to 7136.56, the S&P 500 climbed 2.6% to 2743.15, and the Dow Jones Industrial Average rose 2.3% to 25295.87. Markets were closed on Monday in observance of New Year's Day.
This week's rally followed an impressive 2017 campaign for Wall Street, during which the S&P 500 surged nearly 20%, and defused the belief that the new lower tax rates, which took effect on Monday, would invite some profit taking at the start of the new year.
Cyclical sectors, which typically do well when the outlook for the economy is favorable, set the pace this week with the technology (+4.2%), materials (+4.0%), and energy (+3.9%) groups being the top performers.
Energy shares benefited from an increase in the price of crude oil, which touched a three-year high amid anti-government protests in Iran--although the protests weren't expected to have an impact on the country's oil production. Oil prices were also supported by the Department of Energy's weekly inventory report, which showed that U.S. crude stockpiles declined by 7.4 million barrels last week. West Texas Intermediate crude futures gave back some gains on Friday but still ended with a weekly gain of 1.7% at a price of $61.47 per barrel.
Meanwhile, in the top-weighted technology sector, chipmakers had a solid week, bouncing back from some profit taking at the end of 2017; the Philadelphia Semiconductor Index ended the week higher by 5.8%. Intel (INTC) struggled, however, following reports that its chips contain security flaws. INTC shares finished the week lower by 3.1%.
The minutes from the December FOMC meeting were released on Wednesday, showing that most FOMC members backed a continued path of gradual rate hikes. Some members even saw the possibility for more aggressive tightening due to the new tax code, which Fed officials expect will boost consumer and capital spending.
Investors also received the Employment Situation Report for December, which bucked the longstanding trend of above-consensus headline growth and lagging wage growth. Nonfarm payrolls increased less than expected (148,000 actual vs 188,000 Briefing.com consensus), but the November reading was revised to 252,000 from 228,000. Average hourly earnings came in as expected, showing a month-over-month increase of 0.3%.
With the labor market believed to be approaching full employment, disappointing headline readings could become more commonplace. This would be indicative of employers struggling to find workers with the right skillset, which in turn should translate into upward pressure on wages.
The market dialed up its rate-hike expectations following this week's economic data. The CME FedWatch Tool points to the March FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 68.1%, up from 51.7% last week.