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Stocks Rally On Positive Reaction To Economic Data - U.S. Commentary

Stocks Rally On Positive Reaction To Economic Data - U.S. Commentary
2/1/2013 4:26 PM ET

Stocks moved sharply higher over the course of the trading day on Friday, benefiting from a positive reaction to the latest batch of U.S. economic data. The gains on the day lifted the Dow above 14,000 for the first time in over five years.

The major averages moved roughly sideways going into the close, ending the session near their best levels of the day. The Dow jumped 149.21 points or 1.1 percent to 14,009.79, the Nasdaq soared 36.97 points or 1.2 percent to 3,179.10 and the S&P 500 surged up 15.06 points or 1 percent to 1,513.17.

With the gains on the day, the major averages moved higher for the fifth consecutive week. The Dow rose by 0.8 percent for the week, while the Nasdaq and the S&P 500 advanced by 0.9 percent and 0.7 percent, respectively.

The rally on Wall Street was triggered as traders reacted positively to the Labor Department's closely watched monthly employment report for January.

While the report showed that employment increased by slightly less than expected in January, it also showed notable upward revisions to the job growth in previous months.

The report showed that non-farm payroll employment increased by 157,000 jobs in January following an upwardly revised increase of 196,000 jobs in December. Economists had been expecting employment to increase by about 165,000 jobs.

Along with the upward revision to the December job numbers, the report also showed that the increase in jobs in November was upwardly revised to 247,000 from 161,000.

Despite the continued job growth, the unemployment rate unexpectedly edged up to 7.9 percent in January from 7.8 percent in December. The increase surprised economists, who had expected to unemployment rate to dip to 7.7 percent.

However, Chris Low, chief economist at FTN Financial, noted, "Because the rate rise was caused by an increase in the number of people looking, it was not an entirely bad thing."

Additional buying interest was generated by a report from the Institute for Supply Management showing a continued expansion in manufacturing activity in January, with the index of activity in the sector reaching a nine-month high.

Separate reports also showed an unexpected improvement in consumer sentiment and a bigger than expected increase in construction spending.

Among individual stocks, computer giant Dell (DELL) posted a notable gain on reports that the company is close to a buyout agreement. Shares of Dell rose by 3 to an eight-month closing high.

Energy giant Exxon Mobil (XOM) closed nearly flat are reporting fourth quarter earnings that rose year-over-year and exceeded analyst estimates. The company said oil and gas output fell 5.2 percent.

Meanwhile, shares of Merck (MRK) came under pressure after the drug giant reported better than expected fourth quarter results but issued cautious guidance for 2013.

Sector News

Most of the major sectors moved to the upside over the course of the trading day, reflecting broad based buying interest on Wall Street.

Semiconductor stocks saw substantial strength on the day, resulting in a 1.9 percent gain by Philadelphia Semiconductor Index. With the gain, the index reached a nine-month closing high.

STMicroelectronics (STM) and Veeco Instruments (VECO) turned in two of the semiconductor sector's best performances, advancing by 5.2 percent and 4.6 percent, respectively.

Considerable strength was also visible among banking stocks, as reflected by the 1.7 percent gain posted by the KBW Bank Index. Strong gains by Bank of America (BAC) and BB&T (BBT) helped lift the index to its best closing level in almost two years.

Steel, software, and gold stocks also posted notable gains on the day, with gold stocks benefiting from an increase by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region extended a recent trend and turned in another mixed performance on Friday. While Japan's Nikkei 225 Index rose by 0.5 percent, Hong Kong's Hang Seng Index closed just below the unchanged line.

Meanwhile, the major European markets all moved to the upside on the day. The German DAX Index advanced by 0.7 percent, while the French CAC 40 Index and the U.K.'s FTSE 100 Index both surged up by 1.1 percent.

In the bond market, treasuries showed a notable downturn over the course of the session after seeing early strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, closed up by 2.5 basis points at 2.01 percent after hitting a low of 1.926 percent.

Looking Ahead

Following the slew of economic data released over the past week, the economic calendar for next week is relatively light. Nonetheless, traders are likely to keep an eye on reports on factory orders, service sector activity, labor productivity, and the trade balance.

Earnings news is also likely to attract attention amid the quietness on economic front, with Disney (DIS), Time Warner (TWX), Allstate (ALL), Visa (V), Sprint Nextel (S), and Yum! Brands (YUM) among the companies due to release their quarterly results next week.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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