Major ETFs rallied across the board Friday thanks to a
better-than-expected jobs report that raised hopes the U.S.
economy is expanding.
In afternoon trade, the SPDR S&P 500 (
) surged 2.03%.SPDR Dow Jones Industrial Average (
) jumped 1.75%.
PowerShares QQQ (
), a basket of the 100 largest nonfinancial stocks on the Nasdaq,
bounced up 2.14%.
All three ETFs rebounded from a brief pullback to their
short-term 50-day moving averages. SPY and DIA are just a hair
away from regaining their 52-week highs from early April.
Birinyi Associates noted that Friday was the 11th instance
since the beginning of 2011 in which the SPY rallied 2% by noon.
In a majority of those instances, it continued higher by an
average of 0.7%.
Italy and Spain ETFs, which sold off the most this week,
soared the highest among all nonleveraged ETFs.IShares MSCI Italy
) rocketed 7.94%, while
MSCI Spain Index (
) vaulted 7.64%. Both ETFs broke above short-term resistance at
their 50-day moving averages and recovered all of their losses
from earlier this week.
The Spain government released late Friday a "savings" plan
that would trim 102.1 billion euros ($125 billion) over three
years, the Associated Press reported. The plan, released to the
European Commission, said the country would start creating jobs
in 2014 and grow its economy by 1.2%.
Spain and Italy's leaders have pledged to work together to
resolve their countries' debt crisis at a meeting in Madrid this
IShares MSCI EAFE Index (EFA), tracking developed foreign
markets, climbed 3.34%.IShares MSCI Emerging Markets Index (EEM)
Investors poured $6.5 billion into stock funds and $5.84
billion into bond funds in the last week of July on hopes that
the European Central Bank and U.S. Federal Reserve would undergo
more quantitative easing, according to EPFR Global. Investors
pulled $11.72 billion out of money market funds with European
money market funds accounting for more than 90% of the
Emerging market stocks attracted the largest inflow since
mid-February. Investors flocked to higher-risk, higher-yielding
fixed-income assets such as junk, mortgage-backed and emerging
market bonds on expectations that central banks would keep
interest rates steady.
July's employment report showed the U.S. added 163,000 new
jobs -- far surpassing expectations of 100,000 jobs. It marked
the largest gain since February and broke a three-month string of
disappointing results. New jobs were revised downward for June
and upward for May.
"This report, naturally, is not without its quirks," Marisa Di
Natale, director of Moody's Analytics, wrote in a report. "Large
strike effects in a couple industries probably subtracted about
5,000 jobs from payrolls. Also, annual retooling in the auto
manufacturing industry typically subtracts workers from payrolls
in July, but not as many shutdowns occurred this summer so the
gain of 9,000 jobs in that industry is likely a bit overstated.
Taken together these effects may be a wash."
The job growth rate will unlikely be this strong over the next
few months, Di Natale said. She projects the country will add
120,000 new jobs in August and will see a small increase by
"Slowing in emerging market economies, the European recession,
and uncertainty about fiscal policy here at home are still
weighing heavily on business confidence," she wrote.
Undermining the good news, the unemployment rate rose to 8.3%
from 8.2%. The unemployment rate rose because 195,000 in the
household survey lost their jobs, while 150,000 people left the
labor force. The number of unemployed persons rose by 45,000,
pushing the unemployment rate up by 0.10 percentage point.
"The household survey details are even more volatile than the
payroll data, cautioning against reading much into the decline in
that employment measure, although the unemployment rate itself
typically nets out the volatility of employment and the labor
force together," Jim O'Sullivan, chief U.S. economist at High
Frequency Economics in Valhalla, NY, wrote in a client note. "The
data are consistent with an economy that, while not growing
strongly, is not continuing to weaken sharply either."
Strong payroll numbers means the Fed will less likely engage
in quantitative easing, or money printing, to boost the economy
at its next meeting in September.
Follow Trang Ho on Twitter