Stocks Close Modestly Higher Ahead Of Monthly Jobs Report - U.S. Commentary

(RTTNews) - With traders looking ahead to tomorrow's monthly jobs report, stocks fluctuated over the course of the trading day on Thursday. The markets largely maintained a positive bias, however, and the major averages managed to close higher for the third straight day.

The major averages closed in positive territory but well off their highs for the session. The Dow inched up 6.61 points or less than a tenth of a percent to 14,937.48, the Nasdaq rose 9.74 points or 0.3 percent to 3,658.78 and the S&P 500 edged up 2.00 points or 0.1 percent to 1,655.08.

The modest strength seen at the close of trading on Wall Street came on the heels of the release of a batch of largely upbeat U.S. economic data.

While the data generated some positive sentiment regarding the economy, buying interest was somewhat subdued amid lingering concerns about the outlook for the Federal Reserve's stimulus program.

Traders also seemed reluctant to make any significant moves ahead of the release of the Labor Department's closely watched monthly employment report, which is due to be released on Friday.

Before the start of trading, payroll processor Automatic Data Processing (ADP) released a report showing that private sector employment increased by 176,000 jobs in August compared to a downwardly revised increase of 198,000 jobs in July.

While the job growth was slightly weaker than expected, Mark Zandi, chief economist of Moody's Analytics, said, "It is steady as she goes in the job market. Job gains in August were consistent with increases experienced over the past two-plus years."

The Institute for Supply Management also released a report showing an unexpected increase by its index of activity in the service sector in the month of August.

The report said the ISM's non-manufacturing index climbed to 58.6 in August from 56.0 in July, with a reading above 50 indicating growth in the service sector. The increase came as a surprise to economists, who had expected the index to dip to a reading of 55.0.

Additionally, the Labor Department released a report showing that initial jobless claims fell by more than expected in the week ended August 31st.

The report said initial jobless claims dropped to 323,000, a decrease of 9,000 from the previous week's revised figure of 332,000. Economists had been expecting initial jobless claims to edge down to 330,000.

Sector News

Despite the lackluster performance turned in by the broader markets, health insurance stocks managed to hold on to strong gains for the day. The Morgan Stanley Healthcare Payor Index advanced by 1.6 percent to a new record closing high.

Health Net (HNT) and WellCare (WCG) turned in two of the health insurance sector's best performances, rising by 3 percent and 3.1 percent, respectively.

Considerable strength was also visible among oil service stocks, as reflected by the 1.2 percent gain posted by the Philadelphia Oil Service Index. The strength in the sector came as crude oil for October delivery jumped $1.14 to $108.37 a barrel.

Steel, airline, and electronic storage stocks also saw some strength on the day, while gold stocks came under pressure along with the price of the precious metal.

With gold for December delivery falling $17 to $1,373 an ounce, the NYSE Arca Gold Bugs Index plummeted by 3.4 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Thursday. Japan's Nikkei 225 Index inched up by 0.1 percent, while China's Shanghai Composite Index edged down by 0.2 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the U.K.'s FTSE 100 Index advanced by 0.9 percent, the French CAC 40 Index and the German DAX Index rose by 0.7 percent and 0.5 percent, respectively.

In the bond market, treasuries closed notably lower on the heels of the upbeat data, extending a recent downward trend. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 8.2 basis points to a two-year closing high of 2.979 percent.

Looking Ahead

Trading on Friday is likely to be driven by reaction to the Labor Department's monthly jobs report and how it impacts the outlook for the Fed's asset purchase program.

Jay Morelock, an economist at FTN Financial, said, "If tomorrow's payroll report shows further improvement in the U.S. labor market, expect the Fed to lean on this data as they head into their September meeting, increasing the likelihood tapering will begin in September."

Economists expect employment to increase by about 175,000 jobs in August compared to the addition of 162,000 jobs in July. The unemployment rate is expected to remain unchanged at 7.4 percent.