A tepid nonfarm payroll report had little effect as benchmarks
extended their multi-year gains on Friday. Though the gains on
Friday were nothing to write home about, they ensured weekly gains
for the markets. In a range-bound trading session, investors did
take note of the disappointing jobs data. However, eventually hopes
emerged that the US central bank might soon act towards
implementing additional economic measure.
The Dow Jones Industrial Average (DJI) was up 0.1% and ended at
13,306.64. The Standard & Poor 500 (S&P 500) gained 0.4%
and finished yesterday's trading session at 1,437.92. The
tech-laden Nasdaq Composite Index added a paltry 0.02% to end just
0.61 point higher at 3,136.42. The fear-gauge CBOE Volatility Index
(VIX) dropped 7.8% and settled at 14.38. The advancers on the New
York Stock Exchange outpaced the declining stocks; as for 65%
stocks that gained, 31% stocks closed lower. Total volume on the
NYSE was 3.7 billion shares.
The day's action was largely dominated by the government's
payroll data. The U.S. Bureau of Labor Statistics reported that
total nonfarm payroll employment was up 96,000 in August. This was
well below consensus estimates of 123, 000. This also compared
unfavorably with this year's employment growth average per month of
139,000. Separately, the unemployment rate dropped to 8.1% in
August from prior month's 8.3%. However, the drop in unemployment
rate was reportedly a result of lesser number of people looking for
work.
This report has great significance since total non-farm payroll
accounts which accounts for approximately 80% of the workers who
produce the entire gross domestic product of the United States, was
largely below expectations as well as lower than the year's monthly
average. While investors did get jittery following the release of
this jobs data, the Street's hopes for additional economic measures
gained strength. Some economists or strategists stated that the
weak numbers would possibly make the US Federal Reserve prioritize
the need for additional economic measures. The central bank's
policy makers are scheduled to meet next week.
These hopes enabled the benchmarks to extend their multi-year
highs. The Dow is now at its best level since December 2007 and the
S&P 500 climbed to its highest since January 2008. However,
benchmarks owed these new multi-year highs to news that the
European Central Bank (ECB) had agreed to buy unlimited bonds to
help the troubled Euro-zone nations. The domestic benchmarks on
Thursday added robust gains after ECB President Mario Draghi
announced the same. He had stated: "The Governing Council decided
on the modalities for undertaking Outright Monetary Transactions
(OMT) in secondary markets for sovereign bonds in the euro area".
The bond purchase would help nations such as Italy and Spain to
control their burgeoning borrowing costs.
The gains on Thursday boosted the benchmarks sufficiently higher
for the week and Friday's gains further ensured a finish in the
green. The Dow, S&P 500 and Nasdaq gained 1.7%, 2.2% and 2.3%,
for the week respectively. This was Dow's best weekly finish since
end of July and the S&P 500 had its best weekly jump in almost
three months.
Looking at the sectors, materials were a major gainer among the
10 S&P industry groups. The Materials Select Sector SPDR (XLB)
jumped almost 2.0%. Among the stocks Cliffs Natural Resources Inc
(NYSE:
CLF
), ArcelorMittal (ADR) (NYSE:
MT
), Vale SA (ADR) (NYSE:
VALE
), Freeport-McMoRan Copper & Gold Inc. (NYSE:
FCX
) and Southern Copper Corp (NYSE:
SCCO
) soared by 14.5%, 7.0%, 6.8%, 8.5% and 5.3%, respectively.
CLIFFS NATURAL (CLF): Free Stock Analysis
Report
FREEPT MC COP-B (FCX): Free Stock Analysis
Report
ARCELOR MITTAL (MT): Free Stock Analysis Report
SOUTHERN COPPER (SCCO): Free Stock Analysis
Report
VALE SA (VALE): Free Stock Analysis Report
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