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Upbeat Economic Data Leads To Modest Strength On Wall Street - U.S. Commentary


Stocks moved mostly higher over the course of the trading day on Friday, although buying interest was somewhat subdued. The markets benefited from a positive reaction to the release of some relatively upbeat economic data.

The major averages all finished the day in positive territory, although the Nasdaq closed only just above the unchanged line.

While the Nasdaq inched up 1.09 points or less than a tenth of a percent to 3,101.66, the Dow rose 43.85 points or 0.3 percent to 13,435.21 and the S&P 500 climbed 7.10 points or 0.5 percent to 1,466.47. With the gain, the S&P 500 reached its best closing level since December of 2007.

For the week, the major averages all posted substantial gains. The Dow surged up by 3.8 percent, while the Nasdaq and the S&P 500 jumped 4.8 percent and 4.1 percent, respectively.

The moderate strength on Wall Street came following the release of a report from the Labor Department showing that U.S. employment increased in line with economist estimates in the month of December.

The report showed that non-farm payroll employment increased by 155,000 jobs in December following an upwardly revised increase of 161,000 jobs in November.

Economists had expected employment to increase by about 155,000 jobs compared to the addition of 146,000 jobs originally reported for the previous month.

The Labor Department also said the unemployment rate came in at 7.8 percent in December, unchanged from the previous month's revised figure.

A separate report from the Institute for Supply Management showed that economic activity in the U.S. service sector unexpectedly expanded at a faster rate in December.

The ISM said its non-manufacturing index climbed to 56.1 in December from 54.7 in November, with a reading above 50 indicating growth in the service sector. The increase surprised economists, who had expected the index to edge down to 54.5.

With the unexpected increase, the non-manufacturing index rose to its highest level since reaching 57.3 in February of 2012.

However, traders seemed somewhat reluctant to continue buying stocks after the rally that was seen earlier in the week.

Traders also continued to digest Thursday's release of the minutes of the latest Federal Reserve meeting, which suggested that the central bank could end its quantitative easing program earlier than anticipated.

Sector News

Airline stocks showed a particularly strong move to the upside on the day, driving the NYSE Arca Airline Index up by 2.8 percent. The gain extended a recent upward move by the index, which ended the session at a nearly two-year closing high.

US Airways (LCC), Republic Airways (RJET), and SkyWest (SKYW) turned in some of the airline sector's best performances.

Considerable strength was also visible among networking stocks, as reflected by the 2.8 percent gain posted by the NYSE Arca Networking Index. With the gain, the index ended the session at its best closing level in over eight months.

Oil service stocks also saw significant strength amid a rebound by the price of crude oil. With crude for February delivery closing up $0.17 at $93.09 a barrel after hitting a low of $91.52 a barrel, the Philadelphia Oil Service rose by 2.3 percent.

Railroad, healthcare provider, and financial stocks also posted notable gains on the day, moving higher along with most of the major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Friday. While Japan's Nikkei 225 Index surged up by 2.8 percent in its first trading day of the new year, Hong Kong's Hang Seng Index fell by 0.3 percent.

Meanwhile, the major European markets all moved to the upside over the course of the session. The U.K.'s FTSE 100 Index advanced by 0.7 percent, while the German DAX Index and the French CAC 40 Index rose by 0.3 percent and 0.2 percent, respectively.

In the bond market, treasuries ended the session modestly lower but well off their worst levels of the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by 1.6 basis points to 1.915 percent.

Looking Ahead

While the economic calendar for next week is relatively light, traders are likely to keep an eye on reports on the U.S. trade balance, import and export prices, and weekly jobless claims.

Trading could also be impacted by the European Central Bank's announcement of its latest monetary policy decision next Thursday.

by RTTNews Staff Writer

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