Stocks Close Sharply Higher Following Upbeat Jobs Data - U.S. Commentary

(RTTNews) - After trending lower over the past few sessions, stocks showed a strong move back to the upside during trading on Friday. The markets benefited from a largely positive reaction to a better than expected monthly jobs report.

The major averages closed firmly in positive territory, with the Dow and the S&P 500 back above key psychological levels. The Dow surged up 198.69 points or 1.3 percent to 16,020.20, the Nasdaq advanced 29.36 points or 0.7 percent to 4,062.52 and the S&P 500 jumped 20.06 points or 1.1 percent to 1,805.09.

For the week, the Nasdaq inched up by 0.1 percent, while the Dow fell by 0.4 percent and the S&P 500 was nearly flat.

The strength on Wall Street came on the heels of the release of a report from the Labor Department showing that stronger than expected November job growth helped pushed the unemployment rate down to a five-year low.

The report showed that non-farm payroll employment rose by 203,000 jobs in November following a revised increase of 200,000 jobs in October. Economists had been expecting employment to increase by about 180,000 jobs.

With the stronger than expected job growth, the unemployment rate pulled back to 7.0 percent in November from 7.3 percent in October. The unemployment rate had been expected to dip to 7.2 percent.

The bigger than expected decrease pulled the unemployment rate down to its lowest level since hitting 6.8 percent in November of 2008.

While the report seems to increase the likelihood that the Federal Reserve will begin tapering is asset purchase program in the near future, traders seemed to focus on the economic optimism that was also generated by the report.

Thomson Reuters and the University of Michigan also released a report showing that consumer sentiment has improved by much more than anticipated in the month of December.

The report said the preliminary reading on the consumer sentiment index for December jumped to 82.5 from the final November reading of 75.1. Economists had been expecting the index to edge up to 75.5.

A separate report released by the Commerce Department showed an unexpected drop in personal income in October, although the report also showed personal spending growth that matched expectations.

Sector News

Most of the other major sectors moved to the upside on the day, reflecting the broad based buying interest generated by the upbeat jobs data.

Computer hardware stocks saw considerable strength, resulting in a 1.8 percent advance by the NYSE Arca Computer Hardware Index. With the gain, the index reached a new record closing high.

Logitech (LOGI) helped to lead the hardware sector higher, jumping by 5.8 percent, while Seagate Technology (STX) and Western Digital (WDC) also posted strong gains.

Significant strength was also visible among chemical stocks, as reflected by the 1.7 percent gain posted by the Dow Jones Chemicals Index. PPG Industries (PPG) and Air Products (APD) turned in two of the chemical sectors best performances.

Brokerage, defense, housing, and utilities stocks also showed strong moves to the upside over the course of the trading day.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index advanced by 0.8 percent, while China's Shanghai Composite Index dropped by 0.4 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the German DAX Index jumped by 1 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index rose by 0.8 percent and 0.7 percent, respectively.

In the bond market, treasuries recovered from an early sell-off but still ended the day modestly lower. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by 2.1 basis points to 2.883 percent after reaching a high of 2.932 percent.

Looking Ahead

Following the slew of key economic data released over the past week, the economic calendar for next week is relatively light. Traders are still likely to keep an eye on reports on retail sales, weekly jobless claims, and producer prices.