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Moderate Strength Remains Visible On Wall Street - U.S. Commentary


In a reversal from the previous session, the Dow has remained firmly positive throughout the trading session on Friday, while the tech-heavy Nasdaq has spent the day bouncing back and forth across the unchanged line.

The major averages are currently all positive, although the Dow is modestly outperforming its counterparts. While the Dow is up 153.52 points or 0.6 percent at 25,153.19, the Nasdaq is up 12.40 points or 0.2 percent at 7,294.13 and the S&P 500 is up 9.06 points or 0.3 percent at 2,713.16.

The Dow is benefiting from strong gains by Merck (MRK), Exxon Mobil (XOM), and Chevron (CVX), which are moving higher after reporting better than expected fourth quarter earnings.

On the other hand, a steep drop by Amazon (AMZN) is weighing on the Nasdaq after the online retail giant reported fourth quarter results that exceeded analyst estimates but forecast weaker than expected first quarter revenues.

Traders are also digesting a report from the Labor Department showing much stronger than expected job growth in the month of January but also an uptick in the unemployment rate

The Labor Department said non-farm payroll employment surged up by 304,000 jobs in January compared to economist estimates for an increase of about 165,000 jobs.

However, the report also showed the spike in employment in the previous month was downwardly revised to 222,000 jobs from the initially reported 312,000 jobs.

Andrew Hunter, Senior U.S. Economist at Capital Economics, said the jump in employment in January still provides "further evidence that economic growth remains solid and that the government shutdown had little impact."

Traders have largely shrugged off the unexpected increase in the unemployment rate to 4.0 percent, as the uptick reflected a rise in workers on temporary layoff as a result of the government shutdown.

A separate report from the Institute for Supply Management showed growth in the manufacturing sector unexpectedly reaccelerated in January after seeing a substantial slowdown in December.

The ISM said its purchasing managers index climbed to 56.6 in January from a revised 54.3 in December, with a reading above 50 indicating growth in the manufacturing sector.

Economists had expected the manufacturing index to edge down to 54.0 from 54.1 originally reported for the previous month.

Sector News

Oil service stocks have shown a significant move to the upside over the course of the trading session, driving the Philadelphia Oil Service Index up by 2.4 percent.

The strength in the oil service sector comes amid an increase by the price of crude oil, with crude for March delivery climbing $0.68 to $54.47 a barrel.

Considerable strength also remains visible among brokerage stocks, as reflected by the 1.9 percent jump by the NYSE Arca Broker/Dealer Index.

Semiconductor, networking, and housing stocks are also seeing notable strength, while gold stocks have moved sharply lower amid a decrease by the price of the precious metal.

Other Markets

In overseas trading, most stock markets across the Asia-Pacific region ended roughly flat on Friday, although China's Shanghai Composite Index jumped by 1.3 percent. Japan's Nikkei 225 Index inched up by 0.1 percent, while Hong Kong's Hang Seng Index slipped by less than a tenth of a percent.

Meanwhile, the major European markets all moved to the upside on the day. While the German DAX Index crept up by 0.1 percent, the French CAC 40 Index rose by 0.5 percent and the U.K.'s FTSE 100 Index advanced by 0.7 percent.

In the bond market, treasuries are pulling back after trending higher over the past few sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 5.6 basis points at 2.691 percent.

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