U.S. stocks closed mixed on Friday following mixed nonfarm payroll data for August and the Fed Chair Jerome Powell’s hint for a second rate cut in September. The Dow and the S&P 500 ended in positive territory while the Nasdaq Composite finished in red. For the week as a whole, all three major stock indexes advanced.
The Dow Jones Industrial Average (DJI) climbed 0.3% to close at 26,797.46. The S&P 500 gained 0.1% to close at 2,978.71. However, the Nasdaq Composite Index closed at 8,103.07, dropping 0.2%. The fear-gauge CBOE Volatility Index (VIX) decreased 7.8% to close at 15. A total of 6.27 billion shares were traded on Friday, lower than the last 20-session average of 6.75 billion. Advancers outnumbered advancers on the NYSE by a 1.46-to-1 ratio. On Nasdaq, a 1.09-to-1 ratio favored declining issues.
How Did The Benchmarks Perform?
The Dow closed in positive territory for three consecutive days with 20 components of the 30-stock index closing in the green while the remaining 10 ended in red. The blue-chip index’s gain was mainly boosted by a 1.6% surge in shares of Intel Corp. INTC with a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The S&P 500 also closed in positive territory for three successive days. The Energy Select Sector SPDR (XLE) gained 0.5%. Notably, seven out of total 11 sectors of the benchmark index closed in the green while four finished in red. The Nasdaq Composite ended in red reversing two days of winning streak due to poor performance of tech stocks.
Mixed Jobs Data for August
On Sep 6, the Department of Labor reported nonfarm payroll data for August. The U.S. economy added 130,000 jobs in August compared with the consensus estimate of 163,000. Moreover, job additions for the previous two months --- June and July ---- were reduced by 5,000 and 15,000, respectively. Excluding government hiring, private employers recruited just 96,000 people in August.
Notably, year to date, the U.S. economy has added 158,000 jobs on average per month as against 223,000 per month in 2018. The industries which added maximum jobs in August include professional and business services, hiring by the federal government, Health care and education and financial services with job additions of 37,000, 28,000, 24,000 and 15,000, respectively.
Unemployment rate remained unchanged at 3.7%. The real unemployment rate,which includes discouraged and underemployed workers, grew 7.2% in August from 7% in July. Labor force participation rate rose to 63.2%, its highest level since August 2013. Moreover, the total number of Americans considered employed jumped 590,000 to a record 157.9 million.
Meanwhile, hourly wage rate increased 0.4% in August compared with 0.3% in July. The consensus estimate was also 0.3%. Year over year, wage rate increased 3.2% in August compared with the consensus estimate of 3%.
Powell Hints at Rate Cut
On Sep 6, Fed Chair Jerome Powell once again reiterated his pledge that the central bank will do whatever is needed to sustain U.S. economic expansion. Weak job growth, tepid manufacturing data, lower business spending and muted inflation are near-term concerns for the central bank. However, Powell cited that the fundamentals of the U.S. economy remains strong and there no chance of an immediate recession.
All three major indexes ended in the positive territory for the week as a whole. The Dow, the S&P 500 and the Nasdaq Composite gained 1.5%, 1.8% and 1.8%, respectively. This was the second consecutive weekly gain for all three major stock indexes.
The market is overwhelmingly expecting that Fed will reduce the benchmark interest rate in September by at least 25 basis points after doing so in July after eleven years. Moreover, investors are hopeful that the U.S.-China trade negotiation will restart from early October, which may at least stop further intensification of tariff war.
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