Stocks showed a lack of direction throughout the trading day on Friday, largely holding on to the substantial gains posted in the previous session. The choppy trading came as traders digested a disappointing jobs report.
The major averages eventually ended the session modestly higher, reaching new multi-year closing highs. The Dow edged up 14.64 points or 0.1 percent to 13,306.64, the Nasdaq inched up 0.61 points or less than a tenth of a percent to 3,136.42 and the S&P 500 rose 5.80 points or 0.4 percent to 1,437.92.
Largely due to Thursday's standout gains, the major averages all moved higher for the week. The Dow rose by 1.6 percent, while the Nasdaq and the S&P 500 advanced by 2.3 percent and 2.2 percent, respectively.
The lackluster performance on Wall Street on Friday came after the Labor Department released its closely watched monthly employment report, showing that employment increased by less than expected in August.
While the data points to continued sluggishness in the labor market, the report also increased optimism about further monetary stimulus from the Federal Reserve.
The report showed that employment increased by 96,000 jobs in August following a downwardly revised increase of 141,000 jobs in July. Economists had expected an increase of about 125,000 jobs compared to the addition of 163,000 jobs originally reported for the previous month.
Despite the weaker than expected job growth, the unemployment rate dropped to 8.1 percent in August from 8.3 in July. The unemployment rate had been expected to come in unchanged.
However, the unexpected drop by the unemployment rate came amid a notable decrease by the size of the workforce, which shrank by 368,000 people.
Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "Under those circumstances, it is hard to characterize the drop in the unemployment rate as any sort of good news."
"This failure to fulfill the full employment side of its dual mandate is why the Fed is expected to launch another round of large-scale asset purchases at next week's FOMC meeting," he added.
The Federal Reserve is scheduled to hold a monetary policy meeting next week, with the disappointing jobs data boosting optimism about another round of quantitative easing.
Meanwhile, shares of Intel (INTC) came under pressure after the semiconductor giant cut its third quarter revenue guidance as a result of weaker than expected demand.
Intel said it now expects third quarter revenues of $13.2 billion, plus or minus $300 million, compared to its previous forecast for revenues of $13.8 billion to $14.8 billion. The company also said full-year capital spending is expected to be below the low-end of its previous outlook.
In overseas trading, stock markets across the Asia-Pacific region moved sharply higher on Friday on the heels of the overnight rally on Wall Street. Japan's Nikkei 225 Index surged up by 2.2 percent, while Hong Kong's Hang Seng Index soared 3.1 percent.
The major European markets also moved to the upside, adding to Thursday's gains. While the German DAX Index advanced by 0.7 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index both ended the day up by 0.3 percent.
In the bond market, treasuries pulled back well off their early highs, ending the day nearly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.2 basis points to 1.661 percent after hitting a low of 1.589 percent.
Despite the lackluster performance by the broader markets, steel stocks moved sharply higher on the day. The NYSE Arca Steel Index surged up by 5.6 percent, adding to the 3.8 percent gain it posted in the previous session.
The strength among steel stocks was partly due to news that China's National Development and Reform Commission approved more than $150 billion in infrastructure projects to help stimulate the economy.
Gold stocks also saw significant strength, benefiting from a notable increase by the price of the precious metal. With gold for December delivery jumping $34.90 to $1,740.50 an ounce, the NYSE Arca Gold Bugs Index advanced by 2.8 percent.
Oil service, financial, and airline stocks also saw strength on the day, while semiconductor stocks moved to the downside after Intel cut its guidance.
All eyes are likely to be on the Federal Reserve next week, with the central bank holding a two-day monetary policy meeting beginning on Wednesday.
Reports on the U.S. trade balance, retail sales, industrial production, and producer and consumer price inflation may also attract some attention but are likely to be overshadowed by the Fed.
by RTT Staff Writer
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