Jobs, Gloomy Data Highlight the Week on Wall Street

Though less volatile than previous weeks in terms of violent day-to-day swings, it was an ugly week for Wall Street. The major averages stumbled through the last five days, ultimately capping the period solidly in negative territory. By the closing bell Friday, the Dow dropped 1.7% with the S&P losing just more than 3%. But the steepest losses came on the Nasdaq after a sharp drop in technology shares, taking the tech-heavy index down more than 3% for the week.

Zooming out to a more macro view, Wall Street digested several key economic reports this week including data on both the manufacturing and services sectors, and a big jobs report on Friday.

These are the biggest headlines you might have missed.

Manufacturing, Services Slow in January

The week kicked off with data from the Institute for Supply Management, which showed the U.S. manufacturing sector notched its fourth-straight month of contraction as the gauge rose slightly to 48.2 in January from 48 in December. The reading was below the 50 mark that separates expansion from contraction. Not only was the headline figure weak, the employment component recorded its lowest reading since June.

The outlook on the manufacturing sector of the economy didn’t perk up on Wednesday when the Commerce Department released its factory data showing orders at the gate saw the biggest drop in a year in December.

Meanwhile, ISM’s gauge of service sector growth showed a slowdown in that area of the economy in January as well. The gauge dropped to 53.5 last month from 55.8 in December. It was the lowest reading since February 2014.

Andy Kapyrin, director of research at Regent Atlantic, said the manufacturing-sector slowdown was something investors should have seen coming.

“The U.S. dollar has been really strong…that really hurts manufacturing because to the extent that we still manufacture, it’s high-quality goods that are exported abroad,” he explained. “It’s not a surprise at all that manufacturing is struggling. I wouldn’t read that as negative data for the most part because we should have seen this.”

Despite that, he said this week’s data, and how it’s likely to help keep consumers cautious, could be more ammunition to prevent the Federal Reserve from hiking rates again at its March meeting.

January Jobs Has Something for Everyone

The Labor Department was out with its non-farm payrolls report for January on Friday, and investors all over the map had something to keep them satiated.

The economy added 151,000 jobs during the month, far less than the 190,000 jobs analysts expected, and well below the 262,000 added in December, a downward revision from the 292,000 initially reported.

However, the unemployment rate ticked down to 4.9%, the lowest level in eight years, from 5%, amid expectations for it to remain unchanged, while the labor force participation rate rose to 62.7% from 62.6%.

Unexpectedly, especially on the heels of the weak data from ISM earlier in the week, factory jobs were a bright spot in the first month of the year. In the sector, 29,000 jobs were created, well above the expectation for a loss of 2,000 jobs. The December figures were also revised up to 13,000 from 8,000.

Average hourly earnings, meanwhile, were up 2.5% from a year ago.

“The jobs report on the whole is a good thing because what it says is today, if you’re looking for a job, you have a relatively easy time finding it. People are coming back into the workforce, which is a complete about-face from the trend over the last few years, but the biggest thing it says is…we might see meaningful wage growth again,” Kapyrin said.

Earnings Season Rolls On

A large swath of the nation’s companies have so far reported fourth-quarter results, with a big chunk of them out this week including names like Alphabet – Google’s parent company – (NASDAQ:GOOGL), Exxon (NYSE:XOM), Pfizer (NYSE:PFE), General Motors (NYSE:GM) and ConocoPhillips (NYSE:COP).

According to S&P Capital IQ, aggregate earnings for the quarter are expected to decline 5.11% from the same period last year with only four sectors showing positive results. The health care, telecommunications and consumer discretionary were seen as the leaders with growth of at least 9.3%, while energy continues to be the biggest laggard with -75% growth.

Of the 317 S&P 500 companies that have so far reported their results, 211 have beat analysts’ estimates, while 60 missed and 46 met.

Kapyrin said this quarter was generally a repeat of the third quarter – localized weakness in energy and some exporters. He pointed to Chevron, which reported its first full-year loss in more than 10 years.

“This might be a sign that we’re coming to the end of the energy-crisis cycle,” he said.

Next week, Wall Street looks for 13% of S&P companies to release their quarterly results.

What to Watch Next Week

In addition to quarterly score cards for Corporate America, investors look forward to a relatively calm week on the economic front with few key releases until the end of the week.

?         Monday: No significant releases

?         Tuesday: Wholesale trade

?         Wednesday: Federal budget

?         Thursday: Weekly jobless claims

?         Friday: Retail Sales, import and export prices, consumer sentiment.