Fewer jobs were added in December than expected, but report shouldn't change the Fed's policy path
All three main equity benchmarks posted record gains on Friday to end the first week of 2018 on a stellar footing, marked by four straight positive session, following lackluster jobs data.
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What did stocks do?
The Dow Jones Industrial Average rose 220.74 points, or 0.9%, to 25,295.87. The S&P 500 index closed up 19.16 points, or 0.7%, at 2,743.15. The Nasdaq Composite Index gained 58.64 points to 7,136.56, a gain of 0.8%.
Friday's rally meant that none of the equity indexes have posted a down day so far in 2018. For the S&P 500 and the Nasdaq, it was the fourth straight closing record, while the Dow carved out its third in a row. The broad-market benchmark has closed at a record on the first four trading days of the new year, the first time it has done so since 1964 (http://www.marketwatch.com/story/the-sp-500-is-poised-to-do-something-it-hasnt-done-since-1964-2018-01-04), according to WSJ Market Data Group.
For the week, the Dow rose 2.3%, the S&P 500 gained 2.6%, while the Nasdaq is up 3.4%. The Dow notched the biggest weekly gain since the period ended Dec. 1, 2017, the S&P 500 recorded its best weekly rise since Nov. 11, 2016, and the Nasdaq logged its best climb over the same period since Dec. 9., 2016.
The small-cap focused Russell 2000 index and the Dow Jones Transportation Average also closed at all-time highs.
What drove the market?
The gains over the week have been buoyed by the recently passed corporate tax-cut package, rising commodity prices, and robust corporate earnings. Solid economic data and low bond yields have also been cited as contributing factors.
What the data are saying?
The U.S. created 148,000 jobs in December (http://www.marketwatch.com/story/us-adds-148000-jobs-in-december-unemployment-flat-at-41-2018-01-05). This was the slowest pace in three months, and below the 198,000 increase that economists polled by MarketWatch had predicted. The unemployment rate remained steady at 4.1% for the third straight month. Worker pay increased 2.5% from December 2016 to December 2017, up from 2.4% in the prior month.
Separately, the U.S. trade deficit widened 3.2% in November (http://www.marketwatch.com/story/us-trade-deficit-swells-to-largest-since-january-2012-2018-01-05) to $50.5 billion, the highest trade gap since January 2012. Economists polled by MarketWatch had forecast a $50 billion gap.
In other economic news on Friday, the Institute for Supply Management's nonmanufacturing index sank 1.5 points to 55.9% (http://www.marketwatch.com/story/service-sector-growth-tumbles-in-december-ism-says-2018-01-05) in December. U.S. factory orders rose 1.3% in November (http://www.marketwatch.com/story/us-factory-orders-climb-for-fourth-straight-month-2018-01-05), a faster pace than had been expected, and the fourth straight monthly increase. A reading of 50 or better signifies improving activity.
What are strategist saying?
The jobs report "is a market-friendly number, in that it is good but not overheated. Investors should interpret this as Fed-friendly, in that the central bank will remain interested in the economy but not get overly aggressive in raising rates in 2018," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
"While it came in below expectations, it wasn't sufficiently weak for investors to feel they should sell. Single months of data can be lumpy, but the average over the past few months shows that the labor market remains strong."
Philadelphia Fed President Patrick Harker on Friday said he thinks the U.S. central bank will only raise interest rates twice this year (http://www.marketwatch.com/story/feds-harker-sees-only-two-interest-rate-hikes-in-2018-2018-01-05), one fewer than the Fed's median forecast of three increases in 2018.
Fed President of Cleveland Loretta Mester told CNBC on Friday that the jobs report was strong and that she could foresee three or four rate increases in 2018. "I think we're basically at maximum employment from the view of monetary policy," she said.
Which stocks were in focus?
The day's gains were broad, with seven of the 11 primary S&P 500 sectors higher on the day. Tech shares were among the biggest gainers, up 1.2%, which helped to lift the broader Nasdaq, which has a heavy weighting to the sector. Microsoft Corp.(MSFT) rose 1.2%, while Alphabet Inc.(GOOGL), the parent company of Google, added 1.3%.
Apple Inc.(AAPL) rose 1.1%. The technology giant published information late Thursday that confirmed that all devices (http://www.marketwatch.com/story/apple-admits-its-devices-are-affected-by-meltdown-and-spectre-chip-bugs-2018-01-04) running its mobile and personal-computer operating systems are affected by two massive computer chip vulnerabilities (http://www.marketwatch.com/story/meltdown-and-spectre-are-huge-vulnerabilities-for-intel-and-more-what-you-need-to-know-2018-01-03).
Spirits-and-beer company Constellation Brands Inc.(STZ) fell 2.6% after it reported sales that came in below analyst forecasts (http://www.marketwatch.com/story/corona-beer-distributor-constellation-brands-sales-falls-short-of-estimates-2018-01-05).
U.S.-listed shares of Fiat Chrysler Automobiles NV(FCA.MI) gained 6.4% after J.P. Morgan Chase & Co. upgraded the car maker to overweight from neutral.
Shares of Cal-Maine Foods Inc.(CALM) dropped 6.9% after the company missed earnings estimates for its fiscal second quarter (http://www.marketwatch.com/story/cal-maine-shares-slide-almost-5-premarket-after-earnings-fall-short-of-estimates-2018-01-05).
AveXis Inc.(AVXS) finished down 2.5% in volatile trading. The gene-therapy company said late Thursday it was preparing to respond to Food and Drug Administration information requests about AveXis's primary gene therapy, which would be used to treat a form of spinal muscular atrophy.
Cellect Biotechnology Ltd.(APOP) rose 1.8% a day after announcing "breakthrough" results in a clinical trial (http://www.marketwatch.com/story/cellect-stock-rockets-50-on-breakthrough-trial-announcement-but-results-are-for-just-three-patients-2018-01-04), although the results were for just three patients.
Kala Pharmaceuticals Inc.(KALA) tumbled nearly 30% in heavy trading after it released results from two late-stage trials (http://www.marketwatch.com/story/kala-shares-decline-on-late-stage-trial-results-for-dry-eye-therapy-2018-01-05) for its dry eye therapy KPI-121.
What did the markets do?
Asian stock markets continued to power higher (http://www.marketwatch.com/story/asian-markets-continue-soaring-to-new-highs-but-show-signs-of-cooling-2018-01-04), with Japan's Nikkei 225 index ending at a 26-year high.
It was a similar story in Europe (http://www.marketwatch.com/story/european-stocks-rise-for-3rd-day-as-global-rally-stays-strong-2018-01-05), where the Stoxx Europe 600 index rose 0.6%.
The dollar recorded its third weekly loss (http://www.marketwatch.com/story/dollar-rebounds-as-traders-look-to-jobs-data-for-inflation-hints-2018-01-05), but the ICE dollar index finished slightly higher up 0.1% at 91.975.
Crude-oil prices retreated from a three-year high, settling at $61.44 a barrel, (http://www.marketwatch.com/story/oil-prices-fall-losing-grip-on-3-year-high-2018-01-05) but posted a third straight weekly gain, while gold futures settled higher at $1,322.30 an ounce, and marked its longest win streak (http://www.marketwatch.com/story/golds-long-win-streak-hits-pause-ahead-of-jobs-report-2018-01-05), 11 straight sessions, in history.
In cryptocurrencies, bitcoin futures jumped 7.8% to $16,075. Bitcoin spot prices rose 8% to $16,300 on Coindesk.com.
(END) Dow Jones Newswires
January 05, 2018 17:24 ET (22:24 GMT)