Fewer jobs were added in December than expected, but report shouldn't change Fed policy path
U.S. stock indexes rose on Friday, with equity benchmarks hitting records for a fourth straight session after the December jobs report indicated further improvements in the labor market, while not being so strong as to accelerate the Federal Reserve's pace of rate hikes for 2018.
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What are stocks doing?
The Dow Jones Industrial Average rose about 150 points, or 0.6%, to 25,223. The S&P 500 index was up 13 points, or 0.5%, to 2,736. The Nasdaq Composite Index gained 44 points to 7,121, a gain of around 0.6%. All three hit intraday records soon after the open, and are on track for their fourth straight day of gains, which would also mean that 2018 has yet to see a down day.
If the S&P and the Nasdaq close higher, they would hit their fourth straight closing record, while the Dow would carve out its third. The S&P has closed at a record on the first three 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 is up 1.8%, the S&P is up 2.3% and the Nasdaq is up 3.2%. Both the S&P and the Nasdaq are set for their biggest weekly gain since December 2016.
What's driving 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 Loretta Mester is expected to speak on a panel about "coordinating conventional and unconventional monetary policy for macroeconomic stability" at 12:30 p.m. in Cleveland.
Which stocks are 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%, 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 1.5%.
Apple Inc.(AAPL) rose 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 2.2% 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 4.2% after J.P. Morgan upgraded the car maker to overweight from neutral.
Shares of Cal-Maine Foods Inc.(CALM) dropped 7.9% 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) rose 0.2% 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 1.4% 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) fell 26% 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 are other markets doing?
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 was higher after the data (http://www.marketwatch.com/story/dollar-rebounds-as-traders-look-to-jobs-data-for-inflation-hints-2018-01-05), with the ICE dollar index up 0.2% at 92.051.
Crude-oil prices retreated from a three-year high to end the week, but posted a third straight weekly gain 1% to $61.44 a barrel, while gold futures were settled higher at $1,322.30 an ounce.
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 15:02 ET (20:02 GMT)