The Week In Review
The S&P 500 could not avoid its third consecutive decline on Friday as rising rate hike expectations weighed on equities. To be fair, the benchmark index missed a green close by 0.74 points while the Dow (+0.3%) and Nasdaq Composite (+0.4%) erased their opening losses.
Equities stumbled at the start after the October Employment report easily surpassed expectations, thus increasing the likelihood of a fed funds rate hike at the December policy meeting to 69.8% from yesterday's 58.1%. Specifically, October nonfarm payrolls came in at 271,000 while the Briefing.com consensus expected a reading of 181,000. Also of note, hourly earnings rose 0.4% while the consensus expected an uptick of 0.2%.
Once the report crossed the wires, investors rushed into the greenback while Treasuries and equity futures retreated. The Dollar Index (99.14, +1.21) held its ground to end the day higher by 1.2% near levels last seen in mid-April. As for Treasuries, the 10-yr note finished near its low with the benchmark yield rising ten basis points to 2.33%, representing the highest settlement since late July.
Similar to Treasuries, equities slumped in immediate reaction to the report, but unlike Treasuries, the stock market staged a rebound off its opening lows. Six sectors ended the day with losses while financials (+1.1%) and technology (+0.4%) outperformed throughout the day, helping the market return into the neighborhood of its flat line by the closing bell.
The financial sector rallied due to the rising probability of a December rate hike, extending this week's gain to 2.5%, which put the sector ahead of its peers. Meanwhile, the top-weighted tech space spent the day near its flat line with broad strength in the chipmaker space overshadowing a mixed performance from large cap sector components. To that point, the PHLX Semiconductor Index surged 2.6% with Skyworks (SWKS 85.99, +5.71) and NVIDIA (NVDA 31.55, +3.84) soaring 7.1% and 13.9%, respectively, in reaction to better than expected results.
On the downside, countercyclical sectors faced the most aggressive selling with consumer staples (-1.1%), telecom services (-0.7%), and utilities (-3.6%) ending at the bottom of the leaderboard. That being said, the energy sector (-0.4%) also finished among the laggards despite showing considerable strength earlier this week. The growth-sensitive group narrowed its weekly gain to 1.1% while crude oil surrendered 2.0% on Friday, ending the week lower by 4.8% at $44.29/bbl.
Today's participation was well ahead of average with more than 975 million shares changing hands at the NYSE floor.
Taking another look at today's employment data:
Nonfarm payrolls increased by 271,000 (Briefing.com consensus 181,000)
September nonfarm payrolls revised to 137,000 from 142,000
Private sector payrolls increased by 268,000 (Briefing.com consensus 160,000)
September private sector payrolls revised to 149,000 from 118,000
Unemployment rate slipped to 5.0% (Briefing.com consensus 5.1%) from 5.1% in September
The U6 unemployment rate, which accounts for the total unemployed plus persons marginally attached to the labor force and the underemployed, was 9.8% versus 10.0% in September
Average hourly earnings increased 0.4% (Briefing.com consensus 0.2%) after being unchanged in September
Over the last 12 months, average hourly earnings have risen 2.5% versus 2.3% in September, representing the highest year-over-year rate since July 2009
The labor force participation rate held at 62.4% for the second month in a row
On a separate note, the Consumer Credit report for September showed an increase of $28.90 billion while the Briefing.com consensus expected growth of $18.00 billion. It is worth noting that the September reading represented the biggest jump in non-revolving credit since July 2011.
Monday's session will be free of economic data.
Nasdaq Composite +8.5% YTD
S&P 500 +1.8% YTD
Dow Jones Industrial Average +0.3% YTD
Russell 2000 -0.4% YTD
Week in Review: Nasdaq Leads Stocks Higher
The stock market rallied to begin November with the Nasdaq Composite setting the pace. The tech-heavy index surged 1.5% while the S&P 500 (+1.2%) followed right behind. Equity indices started the trading day on an inconspicuous note after the overnight session featured some mixed economic data. In China, October Manufacturing PMI missed expectations (49.8; expected 50.0) while final Caixin PMI improved to 48.3 from 47.6, but remained below 50.0, indicating continued contraction. Asian markets ended the day on a broadly lower note, but the investor sentiment improved after European participants joined the fray and the market was treated to mostly better than expected PMI readings from regional economies. The eurozone Manufacturing PMI improved to 52.3 from 52.0 (expected 52.0), helping lift European markets off their opening lows. Once the U.S. session got going, an opening trot higher turned into a daylong charge paced by energy and biotechnology as both groups built on their October gains. Biotech names wasted no time, rallying from the opening bell to send the iShares Nasdaq Biotechnology ETF (IBB 338.06, +12.60) higher by 3.9%. For its part, the health care sector spiked 2.1%, but the group was overtaken by the energy sector (+2.4%) during the afternoon.
Stocks registered their second consecutive advance on Tuesday with the S&P 500 climbing 0.3%. The benchmark index settled a bit behind the Nasdaq Composite (+0.4%) and the Dow Jones Industrial Average (+0.5%) with cyclical sectors pacing the advance. Equity indices saw modest losses at the start of the trading day, but the market was able to overcome the early weakness thanks to continued leadership from the energy sector as the growth-sensitive group surged 2.5% to extend its weekly gain to 5.0%. The Tuesday rally was powered by a 3.8% spike in crude oil, which settled at $47.90/bbl, while top-weighted components like Chevron (CVX 98.14, +3.18) and ExxonMobil (XOM 86.83, +1.55) posted respective gains of 3.4% and 1.8%.
The market snapped its two-day streak on Wednesday, but the midweek pullback was fairly modest in scope. The S&P 500 shed 0.3% while the Nasdaq Composite (-0.1%) outperformed, settling just below its flat line. Equity indices began the day on a modestly higher note, but the slight early strength faded quickly, sending the major averages into the red during the opening hour. In addition, investors heard from Fed Chair Janet Yellen who addressed the House Financial Services Committee to discuss regulation and supervision of financial institutions; however, the Q&A portion drifted towards questions about the upcoming December policy meeting with Fed Chair Yellen reiterating that a rate hike could happen in December if economic data shows improvement. Eight sectors ended the day in negative territory with energy (-1.0%) spending the bulk of the session behind the remaining nine groups. It is worth noting that the slide followed a 5.0% gain over the previous two days and the sector also had to contend with selling in the commodity market where crude oil fell 3.4%, ending the pit session at $46.32/bbl.
Equity indices posted their second consecutive decline on Thursday with the S&P 500 shedding 0.1% while the Nasdaq Composite (-0.3%) underperformed. Broadly speaking, the Thursday affair was fairly quiet, but that was not particularly surprising considering investors were set to receive the Employment Situation report for October on Friday morning. Biotechnology was largely responsible for Thursday's relative weakness in the tech-heavy Nasdaq with Valeant Pharmaceuticals (VRX 78.77, -13.21) back in focus, diving 14.4%, amid continued concerns about the company's revenue recognition practices.