Benchmarks finished in positive territory on Friday following sharp rally in oil prices and better-than-expected jobs report. Fall in rig counts and upbeat nonfarm payroll data pushed oil prices upward, which in turn had a broad-based impact on the market leading to strong gains in materials and energy stocks. Both the Dow and the S&P 500 reached their highest levels since Jan. 5 and the Nasdaq climbed to its highest settlement since Jan. 6. While all the key U.S. indexes advanced for the fourth consecutive day, the S&P 500 registered the same for the first time since October. Benchmarks ended in the green for the third straight week for the first time in 2016.
For a look at the issues currently facing the markets, make sure to read today's Ahead of Wall Street article
The Dow Jones Industrial Average (DJI) increased 0.4%, to close at 17,006.77. The S&P 500 rose 0.3% to close at 1,999.99. The tech-laden Nasdaq Composite Index closed at 4,717.02, gaining 0.2%. However, the fear-gauge CBOE Volatility Index (VIX) increased 1% to settle at 16.86. A total of around 10.3 billion shares were traded on Friday, highest since Feb 11. Advancers outpaced declining stocks on the NYSE. For 63% stocks that advanced, 34% declined.
According to the Bureau of Labor Statistics (BLS), the U.S. economy created a total of 242,000 jobs in February, significantly beating the consensus estimate of 194,000. The tally was also considerably higher than January's upwardly revised figure of 172,000. Jobs grew mainly in sectors like health care and social assistance, retail trade, food services and drinking places, and private educational services. Better-than-expected non-farm payroll numbers indicated improvement in economic conditions and raised possibilities that the Fed may opt for a minimum of one rate hike this year. Meanwhile, the unemployment rate in February was in line with the consensus estimate and January's level of 4.9%.
However, average hourly earnings declined 0.1% or 3 cents in February from previous month's figure to $24.80 per hour, in contrast with the consensus estimate of a 0.2% rise. Despite the decline, average hourly earnings witnessed a 2.2% rise from the year-ago figure. The average workweek of 34.4 hours in February fell by 0.2 hours from previous month's figure. It was also lower than the consensus estimate of 34.5 hours.
Separately, oil prices rallied on Friday following lower-than-expected rig counts and encouraging job data. Baker Hughes ( BHI ) reported that the total number of U.S. oil rigs decreased by 8 to 392 for the week ending March 4, reaching its lowest level since 2009. Moreover, the combined natural-gas and oil rig count declined from 502 to 489 last week, slightly more than the record low of 488 rigs experienced in 1999.
Also, higher-than-expected job data boosted oil prices as increasing job numbers is likely to have a positive impact on oil demand. WTI crude price increased 3.8% to highest level since Jan 5, 2016 of $35.92 per barrel. Also, Brent crude advanced 4.3% to $38.72, its highest level since Dec 10, 2015.
Rally in oil prices helped the Materials Select Sector SPDR ETF (XLB) to advance 1.2%, which was the biggest gainer among the S&P 500 sectors. Key holdings such as Freeport-McMoRan Inc. ( FCX ), Praxair Inc. ( PX ), The Dow Chemical Company ( DOW ), E. I. du Pont de Nemours and Company ( DD ) and Monsanto Company ( MON ) increased 6.9%, 2.8%, 1.4%, 2.1%, 1.1%, respectively.
Moreover, the Energy Select Sector SPDR (XLE) increased 1% and was the second biggest gainer among the major S&P 500 sectors. Dow component Chevron Corp ( CVX ) increased 0.5%. Other key components including, Chesapeake Energy Corp ( CHK ), Transocean Ltd. ( RIG ), ConocoPhillips ( COP ), EOG Resources ( EOG ) and Pioneer Natural Resources Co. ( PXD ) increased 19%, 17.4%, 6.6%, 3.1% and 0.4%, respectively.
In earnings news, shares of Hewlett Packard Enterprise Company ( HPE ) surged 13.5% after reporting fiscal first quarter non-GAAP earnings of 41 cents per share surpassed the Zacks Consensus Estimate of 31 cents per share. The company's total revenue of $12.724 billion beat the Zacks Consensus Estimate of $12.699 billion.
For the week, the Dow, S&P 500 and Nasdaq advanced 2.2%, 2.7% and 2.7%, respectively. Markets ended the week in the green for the third straight week following strong gains in energy and financial sectors and upward movement in oil prices.
Oil prices increased in the week, following positive comments from energy ministers of Saudi Arabia, Nigeria, Russia and United Arab Emirates as well as from an OPEC Gulf delegate. Moreover, data from U.S. Energy Information Administration's (EIA) showed that crude production for the week ending Feb 26 declined by 25,000 to 9.1 million barrels per day. For the week, WTI crude rose 9% and Brent increased nearly 10%.
However, EIA reported that crude inventories rose 10.4 million barrels much higher than American Petroleum Institute (API)'s report of an increase of 9.9 million barrels. This in turn trimmed some of the gains in oil prices.
Positive economic reports for the week include increase in construction spending, domestic vehicle sales and lower-than-expected contraction in U.S. manufacturing activity. Discouraging data on this front includes decline in ISM service index, rising initial claims and lower-than-expected increase in new orders for manufactured goods. Moreover, economic activity improved in most districts of the U.S., according to the Fed's Beige Book. However, the report also stated that economic activity faltered during the latter half of February.
Additionally, gains from Ford Motor Co ( F ) following better-than-expected U.S. auto sales boosted investor sentiment. But losses in Valeant Pharmaceuticals International, Inc ( VRX ) and Endo International ( ENDP ) weighed on key U.S. indexes.