Oil companies fall as crude slides again; silver suffers flash crash
The S&P 500 and the Nasdaq on Friday erased their losses for the week following an employment report that showed the U.S. added 222,000 jobs in June, representing the second-largest job haul of the year and underscoring that the labor market remains healthy.
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The Labor Department said unemployment ticked up to 4.4% from 4.3% (http://www.marketwatch.com/story/us-adds-222000-jobs-in-june-as-hiring-surges-2017-07-07). Economists polled by MarketWatch had forecast a rise of 180,000 and unemployment to hold at 4.3%.
The Dow Jones Industrial Average climbed 95 points, or 0.5%, to 21,415, powered by gains in McDonald's Corp. (MCD) and Microsoft Corp.(MSFT).
The S&P 500 index rose about 16 points, or 0.7%, at 2,425, led by a 1.3% climb in the tech sector. However, energy stocks were among the weakest as crude-oil prices were under pressure.
The tech-laden Nasdaq Composite Index rallied 65 points, or 1.1%, to 6,155.
For the holiday-shortened week, the Dow is on track to book a 0.3% gain while the S&P 500 is mostly flat and the Nasdaq is on pace to add 0.2%. Earlier, the benchmarks were mostly showing weekly losses.
The robust payroll data "will augment the Fed's decision to begin balance sheet reduction sooner than later," Charlie Ripley, investment strategist at Allianz Investment Management US, said in a note. "On balance, the labor market continues to be solid and despite the softer inflation data as of late, the solid employment data should keep the Fed on course for policy normalization."
The government employment report also indicated that readings for jobs in May and April were better than previously reported, perhaps adding more support for the Federal Reserve to continue its plan to normalize monetary policy, lifting rates at least once more in 2017.
"[A headline reading of] 222,000 and a 16,000 upward revision to last month are a lot better than people were expecting," Colin Cieszynski, chief market strategist at CMC Markets, told MarketWatch. "Wages were slightly below expectations which has knocked down [the U.S. dollar] and boosted the Dow," he said.
Average hourly pay rose 0.2% to $26.25 an hour in June, below expectations for a 0.3% gain. Wages have climbed a modest 2.5% in the past 12 months, but pay is still below the usual gains at this point in a cycle of expansion.
Despite lackluster wage growth, which is viewed as a proxy a for stubbornly low inflation, Cieszynski said he viewed the climb in wages as strong and unlikely to change the Federal Reserve's monetary-policy trajectory as it looks to lift interest rates at least once more in 2017 and unwind its $4.5 trillion asset portfolio.
On Thursday, the Nasdaq fell 1% (http://www.marketwatch.com/story/us-stock-futures-pull-lower-as-investors-keep-searching-for-cues-2017-07-06) as investors continued to rotate out of battered technology names. The S&P 500 and Dow average slid 0.9% and 0.7%, respectively, as bonds dropped sharply, sending yields higher.
"The rising yields are a reaction to the shift in emphasis from central banks away from their long held view that advocates ultraloose monetary policy," said Richard Perry, market analyst at Hantec Markets, in a note. "However, can the data back this up?"
The yield on 10-year U.S. Treasury notes rose to 2.38%, around its highest in eight weeks.
J.J. Kinahan, chief strategist at TD Ameritrade, said Friday's action, with stocks climbing at the same time as government bond yields, could be viewed as a healthy sign for Wall Street. Thursday's dynamic of bond prices sinking, pushing yields higher, as stocks also declined runs against the grain of the natural relationship between stocks, perceived as risky and haven bonds, which are typically bought as equities tumble.
"Yields are going back higher and we are finally starting to see a little separation between bonds and stocks, and we'll see if this relationship stays because the traditional relationships have been screwed up [due to central-bank interventions]," he said.
Read:U.S. forecast to add 180,000 jobs in June, but don't be surprised if hiring falls short (http://www.marketwatch.com/story/us-forecast-to-add-180000-jobs-in-june-but-dont-be-surprised-if-hiring-falls-short-2017-07-06)
The greenback was slightly higher after the report (http://www.marketwatch.com/story/dollar-rebounds-after-taper-tantrum-with-us-jobs-in-view-2017-07-07), with the ICE Dollar Index up 0.2% at 95.995.
Economics and G-20: The Fed, in its semiannual monetary policy report (http://www.marketwatch.com/story/fed-sticks-to-script-ahead-of-yellens-testimony-on-capitol-hill-2017-07-07), forecast a gradual hike in interest rates and a winddown of the balance sheet as the economy continues its steady pace of expansion. The report comes ahead of Fed Chairwoman Janet Yellen's testimony on Capitol Hill next week.
Meanwhile, President Donald Trump met with Russian counterpart Vladimir Putin for the first time since taking office on the sidelines of the two-day G-20 leaders' gathering in Hamburg, Germany. The meeting came as Trump's administration is being probed about possible collusion with Russia in its widely suspected interference in the U.S. election.
As the leaders arrived on Thursday, police clashed with thousands of protesters (http://www.marketwatch.com/story/welcome-to-hell-protestors-police-clash-at-g-20-summit-2017-07-07) as around 12,000 people joined in a protest dubbed "Welcome to hell."
Oil blues: In a volatile week for oil prices, crude oil slumped 2.4% on ongoing concerns (http://www.marketwatch.com/story/oil-prices-drop-1-volatile-session-2017-07-07) that production cuts led by the Organization of the Petroleum Exporting Countries aren't enough to balance the oil market.
Read:OPEC can't save oil market alone--the U.S. has to step in, says Morgan Stanley (http://www.marketwatch.com/story/opec-cant-save-oil-market-alonethe-us-has-to-step-in-says-morgan-stanley-2017-07-06)
Stocks to watch: Oil-related companies fell with shares of Transocean Ltd. (RIG) down 2.3%, Apache Corp.(APA) lost 1.7% and Noble Energy Inc.(NBL) dropped 1.2%.
Shares of Qualcomm Inc.(QCOM) gained 1.1% as the company on Thursday filed a complaint against Apple Inc (http://www.marketwatch.com/story/qualcomm-steps-up-fight-against-apple-2017-07-06-164853632).(AAPL), saying the tech giant infringed several of Qualcomm's patents on wireless technology in iPhones and iPads. Apple shares rose 1%.
Shares of Campbell Soup Co.(CPB) rose 0.3% as it said late Thursday that it would buy organic-soup company Pacific Foods for $700 million (http://www.marketwatch.com/story/campbell-soup-to-acquire-pacific-foods-for-700-million-2017-07-06).
Synchronoss Technologies Inc.(SNCR) rallied 4.1% after its board late Thursday said it would explore strategic alternatives, including a sale of the wireless-software company.
A popular way to bet on homebuilders, the SPDR S&P Homebuilders ETF(XHB), led by LGI Homes Inc. (LGIH) and D.R. Horton Inc., which were rallying by at least 4%, was on track for its best daily gain since March 1, on the heels of the employment report that showed job creation in the construction sector.
Other markets: Stocks in Asia extended losses (http://www.marketwatch.com/story/asia-pacific-markets-slump-following-losses-in-us-europe-2017-07-06), while European stocks finished mostly lower (http://www.marketwatch.com/story/european-stocks-fall-on-stumble-in-oil-prices-central-bank-concerns-2017-07-07).
Bond yields in Europe were relatively stable, with borrowing costs on German paper generally flat at 0.576%.
Silver was down 3% to $15.50 an ounce. The metal earlier in the session tanked almost 10% to $14.34 in a flash crash (http://www.marketwatch.com/story/silver-futures-sink-10-rebound-in-flash-crash-2017-07-07) that likely was due to a trading error. Gold traded 1% lower at $1,211.10 an ounce.
--Sara Sjolin contributed to this article.
(END) Dow Jones Newswires
July 07, 2017 13:10 ET (17:10 GMT)