The Week In Review
Equities ended another positive week on a positive note as investors took a relatively disappointing August jobs report in stride, pushing the Nasdaq (+0.1%) to a new record high (6,435.33). The S&P 500 and the Dow climbed 0.2% apiece, ending the day in the middle of their trading ranges. Trading volume was especially light as many investors got a jump start on the extended Labor Day weekend.
The Employment Situation Report for August disappointed on nonfarm payrolls (156K actual vs 183K Briefing.com consensus), nonfarm private payrolls (165K actual vs 173K Briefing.com consensus), the unemployment rate (4.4% actual vs 4.3% Briefing.com consensus), and the average workweek (34.4 actual vs 34.5 Briefing.com consensus). However, another tepid average hourly earnings reading (+0.1% actual vs +0.2% Briefing.com consensus) overshadowed the less-than-stellar metrics.
Average hourly earnings have been reluctant to pick up despite a tightening of the labor market, effectively tempering inflation and, therefore, the market's rate-hike expectations. The fed funds futures market currently places the chances of an additional rate hike this year--which the Fed needs to meet its forecast of three rate hikes in 2017--at 41.4%.
Treasury yields moved solidly higher on Friday to end the week relatively flat. The 10-yr yield climbed four basis points to 2.16%, registering a weekly loss of one basis point, while the 2-yr yield jumped three basis points to 1.35%, settling the week higher by one basis point. Meanwhile, the U.S. Dollar Index (92.77, +0.18) added 0.2% to end the week higher by 0.1%.
Seven of the eleven sectors settled Friday's session in positive territory, but the underperformance of the influential health care (-0.1%) and technology (-0.2%) spaces kept the broader market's gain in check. Still, the two groups ended the week at the top of the leaderboard--in first and second place, respectively. Health care climbed 3.0% for the week while technology added 2.1%.
The energy sector (+0.8%) was the top performer on Friday, followed closely by the financials (+0.4%), consumer discretionary (+0.5%), and materials (+0.7%) groups. Within the consumer discretionary space, automakers outperformed after reporting their U.S. sales for the month of August.
Fiat Chrysler (FCAU 15.86, +0.73), Ford Motor (F 11.35, +0.32), and General Motors (GM 37.36, +0.82) showed notable strength, climbing 4.8%, 2.9%, and 2.2%, respectively. However, GM was the only one to report an increase in sales (+7.5%). FCAU and F reported respective year-over-year declines of 11.0% and 2.1%.
On the earnings front, lululemon athletica (LULU 61.68, +4.13) jumped 7.2% after beating both top and bottom line estimates and issuing above-consensus guidance. The SPDR S&P Retail ETF (XRT 39.70, +0.53) finished higher by 1.4%.
In Washington, reports indicate that the White House will not shut down the government in October in an attempt to gain funding for President Trump's promised barrier along the U.S.-Mexico border. The decision will potentially make it easier for Congress to reach a deal on a short-term budget.
Reviewing Friday's economic data, which included the Employment Situation Report for August, the August ISM Manufacturing Index, July Construction Spending, and the final reading of the University of Michigan Consumer Sentiment Index for the month of August:
The U.S. equity market will be closed on Monday in observance of Labor Day.