The Week In Review



Stocks advanced on Friday, climbing steadily over the course of the session, as investors cheered the Employment Situation Report for February, which showed strong jobs growth while keeping inflation concerns at bay. The Nasdaq Composite climbed 1.8% to finish at a new record high (7560.81), its first record finish since before a volatile round of selling at the beginning of February. Meanwhile, the S&P 500 and the Dow Jones Industrial Average advanced 1.7% and 1.8%, respectively.

Nonfarm payrolls increased by 313,000 in February, blowing past the consensus estimate of 210,000, and the January increase was revised upward to 239,000 (from 200,000). Meanwhile, average hourly earnings increased 0.2%, as expected, which brought the year-over-year increase down to 2.6% from 2.8% in January. The unemployment rate stayed at 4.1%, which is slightly higher than the Briefing consensus estimate of 4.0%, but still good enough for a 17-year low, and the average workweek ticked up to 34.5 from a revised 34.4 in January ( consensus 34.4).

In short, it was another 'Goldilocks' report, pointing to strong economic growth via the impressive nonfarm payroll additions while at the same time giving the market no reason to believe that the Fed will need to be more aggressive in its path to normalization--evidenced by the deceleration in year-over-year wage growth.

U.S. Treasuries sold off in reaction to the jobs report, pushing yields back towards the multi-year highs they hit a couple of weeks ago; the benchmark 10-yr yield advanced to 2.89% after finishing Thursday at 2.87%. The uptick in yields helped underpin the financial sector (+2.5%), which finished at the top of the sector standings.

Within the financial space, Goldman Sachs (GS 270.77, +4.43) settled behind its peers following reports that its CEO Lloyd Blankfein is preparing to step down after serving at the helm for more than 12 years. Co-presidents Harvey Schwartz and David Solomon are the two front runners to replace Mr. Blankfein.

10 of 11 S&P groups finished Friday in the green, with the lightly-weighted telecom services space (-0.1%) being the lone laggard. In addition to financials, industrials (+2.2%), technology (+2.0%), materials (+1.9%), and energy (+1.9%) outperformed, while the consumer staples (+0.6%), real estate (+0.7%), and utilities (+0.3%) groups were relatively week. The energy space was helped by an increase in the price of crude oil, with West Texas Intermediate crude futures climbing 3.1% to $62.05 per barrel following a two-day skid.

News that President Trump accepted an invitation to meet with North Korean leader Kim Jong Un helped underpin Wall Street on Friday. The meeting, which will reportedly take place by the end of May, would mark the first meeting between a sitting U.S. president and a member of the Kim dynasty.

In addition, investors were still chewing on President Trump's tariff announcement on Friday, which went better than many were expecting. The president officially approved tariffs on steel and aluminum imports shortly before Thursday's closing bell, but gave Canada and Mexico an exemption and said that other countries might also receive an exemption depending on their willingness to renegotiate trade deals with the U.S.

  • Nasdaq Composite: +9.5% YTD
  • S&P 500: +4.2% YTD
  • Dow Jones Industrial Average: +2.5% YTD
  • Russell 2000: +4.0% YTD

Week In Review: Bulls Bounce Back, Nasdaq Navigates to New Records

U.S. equities rallied this week, more than reclaiming last week's losses, as investors navigated their way through a host of happenings, including a battle over tariffs in Washington, the latest European Central Bank policy meeting, and the release of the Employment Situation Report for February. The tech-heavy Nasdaq Composite led the charge with a weekly gain of 4.2%, closing Friday at a new all-time high, while the S&P 500 and the Dow Jones Industrial Average advanced 3.5% and 3.3%, respectively.

The tariff saga continued this week as some congressional Republicans and officials within the White House urged President Trump to reconsider the duties on steel and aluminum imports that he proposed last week, fearing that they could cause a trade war. The president refused to back down though, leading to the resignation of his top economic advisor Gary Cohn on Tuesday.

Mr. Trump signed a proclamation to implement the tariffs on Thursday afternoon, but, to the market's delight, exempted Canada and Mexico. The president also left open the possibility of exemptions for other countries depending on their willingness to renegotiate trade deals. The tariffs will take effect on March 23.

Overseas, the European Central Bank left its key policy rates unchanged on Thursday, as expected, and removed from its policy statement a promise to increase its bond purchases if needed. The latter move was seen as a small step towards normalization following years of ultra-accommodative policy. In addition, the ECB reaffirmed that its net asset purchases will remain at a monthly pace of EUR30 billion until the end of September 2018, or beyond, if necessary.

In Asia, North Korean leader Kim Jong Un on Thursday extended an invitation to meet with President Trump, which Mr. Trump accepted. The summit, which will reportedly take place by the end of May, would mark the first face-to-face meeting between a sitting U.S. president and a sitting North Korean leader.

The Employment Situation Report for February was released on Friday morning, showing robust job growth and a deceleration in the year-over-year change in average hourly earnings. Nonfarm payrolls increased by 313,000 ( consensus 210K), while average hourly earnings increased 0.2%, as expected, and the unemployment rate stayed at 4.1% ( consensus 4.0%). The report helped Wall Street close out the week on a positive note, boosting the major averages more than 1.4% apiece on Friday.

11 of 11 S&P sectors finished with weekly gains. Economically-sensitive groups like financials (+4.4%), technology (+4.3%), industrials (+4.4%), and materials (+4.1%) were the top-performing sectors, while countercyclical spaces like consumer staples (+1.7%), utilities (+0.8%), and telecom services (+1.8%) showed relative weakness.

Following this week's rally, the S&P 500 is about 3.0% below its record high (2873), which is a big improvement from -10.1% at the bottom of the February sell off.

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