A strong nonfarm payroll report helped benchmarks snap their
four-day losing streak on Friday. More importantly, strategists
believed that better-than-expected jobs data did not completely
rule out chances of further economic stimulus from the central
bank. The Dow had its best day since June 29, while the S&P 500
was at its highest level since May. Friday's gains also ensured
that benchmarks finished in the green for the week; despite
registering only paltry gains.
The Dow Jones Industrial Average (DJI) gained 217.29 points or
1.7% and ended at 13,096.17. The Standard & Poor 500 (S&P
500) jumped 1.9% to finish Friday's trading session at 1,390.99.
The tech-laden Nasdaq Composite Index surged a robust 2% to close
58.13 points higher at 2,967.90. The fear-gauge CBOE Volatility
Index (VIX) slumped almost 11% to settle at 15.64, reflecting
easing investor fears. Consolidated volumes on the New York Stock
Exchange, NYSE and Nasdaq was 6.8 billion shares. Advancing stocks
were far ahead of decliners. For 80% of stocks that gained, 17%
stocks closed in the red.
The Dow registered its best one-day performance since late June,
rebounding to the psychological 13, 000 level. This level is a key
indicator for the markets as it boosts investor confidence.
Further, Friday's gains helped the Dow close in the green for the
For the blue-chip index, Verizon Communications Inc. (NYSE:
) was the only stock among the 30 Dow components that ended in
negative territory, dropping 0.4%, while McDonald's Corp. (NYSE:
) ended flat. Among the remaining 28 components, Alcoa, Inc. (NYSE:
), Bank of America Corporation (NYSE:
), Cisco Systems, Inc. (NASDAQ:
), General Electric Company (NYSE:
), Hewlett-Packard Company (NYSE:
), Kraft Foods Inc. (NASDAQ:
), Procter & Gamble Co. (NYSE:
), United Technologies Corp. (NYSE:
) led the gains moving up 2.3%, 3.5%, 3.9%, 2.1%, 4.1%, 4.0%, 3.1%
and 3.2%, respectively.
During the earlier part of last week, investors adopted a wait
and watch stance as the Federal Open Market Committee held the
crucial two-day meet. However, the meeting concluded with no
announcements on quantitative easing. The disappointment was
intensified a day later when European Central Bank President Mario
Draghi failed to live up to his pledge of doing "whatever it takes"
to preserve the Euro-zone. While these key events dampened investor
sentiment, nonfarm payroll data easily reversed the markets' losing
The U.S. Bureau of Labor Statistics announced that total nonfarm
payroll employment jumped 163,000 in July. This was a significant
jump from the addition of 64, 000 jobs in June (revised downwards
from the original level of 80, 000). The figure was also clearly
ahead of consensus estimates that projected the addition of 99, 000
jobs. Professional and business services, food services and
drinking places, and manufacturing reported higher employment.
Professional and business services employment jumped 49,000 while
employment in food services and drinking places and manufacturing
were up by 29, 000 and 25, 000, respectively, in July.
Investors received much needed relief from better-than-expected
nonfarm payroll data. Incidentally, the robust jobs data has not
affected the prospects of the third round of bond buyback by the
government. The central bank has suggested that their eyes are on
the jobs number which one of the prime criteria about the necessity
of economic measure. However, the general sentiment is that the
rise in the unemployment rate to 8.3% from 8.2% has kept the door
open for the central bank to decide on a third round of
Separately, the Institute for Supply Management released its
data about economic activity in the non-manufacturing sector.
According to the report: "The NMI registered 52.6 percent in July,
0.5 percentage point higher than the 52.1 percent registered in
June. This indicates continued growth this month at a slighter
faster rate in the non-manufacturing sector". This is marginally
higher than consensus estimates of a reading of 52.2.
Nonfarm payroll data was not only responsible for Friday's
gains, but also helped benchmarks close in the green for the week.
The Dow, S&P 500 and Nasdaq ended the week with gains of 0.2%,
0.4% and 0.3%, respectively. The Dow notched up a record in this
regard too, enjoying its longest weekly stretch of gains this
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HEWLETT PACKARD (HPQ): Free Stock Analysis
KRAFT FOODS INC (KFT): Free Stock Analysis
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