Dow, S&P 500 Reach Record Highs Following Weaker Than Expected Jobs Data

Stocks moved mostly higher during trading on Friday, extending the upward move seen in the previous session. With the continued advance, the Dow and the S&P 500 both ended the session at new record closing highs.

The major averages all ended the day firmly in positive territory. The Dow rose 229.23 points or 0.7 percent to 34,777.76, the Nasdaq advanced 119.40 points or 0.9 percent to 13,752.24 and the S&P 500 climbed 30.98 points or 0.7 percent to 4,232.60.

Despite the rally seen over the past two sessions, the major averages turned in a mixed performance for the week. The Nasdaq slumped by 1.5 percent, while the Dow surged up by 2.7 percent and the S&P 500 jumped by 1.2 percent.

The continued strength on Wall Street came following the release of a closely watched Labor Department report showing much weaker than expected job growth in the month of April.

The Labor Department said non-farm payroll employment rose by 266,000 jobs in April after surging by a downwardly revised 770,000 jobs in March.

Economists had expected employment to spike by 978,000 jobs compared to the jump of 916,000 jobs originally reported for the previous month.

The report also showed the unemployment rate inched up to 6.1 percent in April from 6.0 percent in March, while economists had expected the unemployment rate to drop to 5.8 percent.

Traders reacted positively to the report as the weaker than expected data reinforced the view the Federal Reserve will leave ultra-easy monetary policy in place for the foreseeable future.

Michael Pearce, Senior US Economist at Capital Economics, called the report a “clear reminder that the recovery in the labor market is lagging the rebound in consumption.”

“For the Fed, we suspect that means it will be a many months before it judges the economy has made ‘substantial further progress’ towards its ‘broad based and inclusive’ full employment goal,” Pearce said. “That means any talk of tapering, let alone rate hikes, is still some way off.”

The data led to a particularly strong upward move by high-growth tech stocks, which are seen as more susceptible to higher interest rates.

Sector News

Oil service stocks moved sharply higher over the course of the session, resulting in a 5.2 percent spike by the Philadelphia Oil Service Index. The index ended the session at its best closing level in nearly two months.

The rally by oil service stocks came amid a modest increase by the price of crude oil, with crude for June delivery rising $0.19 to $64.90 a barrel.

Considerable strength was also visible among airlines stocks, as reflected by the 2.1 percent jump by the NYSE Arca Airline Index.

Steel stocks also showed a strong move to the upside on the day, driving the NYSE Arca Steel Index up by 2.1 percent to its best closing level in almost ten years.

Housing, networking, computer hardware and gold stocks also saw notable strength, reflecting broad based buying interest on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Friday. Japan’s Nikkei 225 Index inched up by 0.1 percent, while China’s Shanghai Composite Index slid by 0.7 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the German DAX Index surged up by 1.3 percent, the U.K.’s FTSE 100 Index advanced by 0.8 percent and the French CAC 40 Index rose by 0.5 percent.

In the bond market, treasuries pulled back sharply after initial spike, closing modestly lower. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.6 basis points to 1.577 percent after hitting a two-month intraday low of 1.471 percent.

Looking Ahead

Economic data may attract attention next week, with traders likely to keep an eye on reports on consumer and producer prices, retail sales, industrial production and consumer sentiment.

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