Benchmarks moved higher on Friday, following an unanticipated boost in U.S. jobs growth in October. Consequently, the S&P 500 moved up for the week, following its worst performance in ten weeks on Thursday. The increasing prospect of the Federal Reserve tapering its stimulus program starting December raised bond yields. A few domestic reports were also released on Friday, providing data on non-farm payrolls, personal income, and the Michigan Consumer Sentiment index. The financial sector was the biggest gainer among the S&P 500 industry groups. Utilities sector stocks were the only group to finish in the red.
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) gained 1.1% to close the day at 15,761.78. The S&P 500 rose 1.3% to finish Friday’s trading session at 1,770.61. The tech-laden Nasdaq Composite Index jumped 1.6% to end at 3,919.23. The fear-gauge CBOE Volatility Index (VIX) tumbled 7.26% to settle at 12.90. Consolidated volumes on the New York Stock Exchange were roughly 3.9 billion shares. Advancing stocks outnumbered the decliners. For 56% shares that advanced, only 42% declined.
Major indices ended on a high on Friday. The S&P 500 index recovered from its worst fall in ten weeks, following a better than anticipated jobs report. Investors are now taking into account whether the economy is strong enough to withstand a reduction in monetary stimulus. Jobs data has increased the belief that the Federal Reserve could cut back on its stimulus program in December.
The U.S. Department of Labor reported non-farm payroll numbers. Total non-farm payroll employment increased by 204,000 in October, higher than the consensus estimate of 114,000. The unemployment rate increased marginally from 7.2% to settle at 7.3%.
Going further into the details of the jobs numbers, leisure and hospitality jobs rose 53,000. Food services and drinking places contributed to 29,000 new jobs, retail trade jobs accounted for 44,000, and jobs in professional and technical trade services increased by 21,000. Jobs in management and technical consulting services increased by 8,000. Manufacturing jobs contributed to 19,000. Healthcare jobs increased over the month by 15,000.
Also, Federal employees on furlough during the partial government shutdown were still considered to be employed during the payroll survey. This is because they worked or received pay for the pay period that included the 12th of the month.
The U.S. Department of Commerce released personal income and consumption expenditures numbers. Personal income increased by $67.4 billion or 0.5%, whereas disposable personal income (DPI) increased by $64.8 billion or 0.5%, in September. According to the Bureau of Economic Analysis, Personal Consumption Expenditure (PCE) increased by $24.7 billion or 0.2%. In August personal income increased $65.6 billion, or 0.5%, DPI increased by $66.3 billion or 0.5%. PCE increased $39.8 billion, or 0.3%, based on revised estimates. Real disposable personal income increased 0.4% in September, the same as in August. Real Personal Consumption Expenditures (PCE) increased 0.1% in September, compared to an increase of 0.2% in August.
Additionally, the Thomson Reuters/University of Michigan reported consumer sentiment numbers. The preliminary consumer sentiment index fell to 72 in November from the previous month’s reading of 73.2. This was marginally below the consensus estimate of 74.6. Consumer sentiment may have taken a hit due to fears that the Fed may begin tapering its bond purchases from next month itself, given the slew of positive data.
The financial sector was the biggest gainer among the S&P 500 industry groups and the financial sector SPDR (XLF) gained 2.3%. Stocks such Berkshire Hathaway Inc. (BRK.B – Analyst Report), Wells Fargo & Co (WFC – Analyst Report), JPMorgan Chase & Co. (JPM – Analyst Report), Bank of America Corp (BAC – Analyst Report), Citigroup Inc. (C – Analyst Report) gained 1.8%, 2.4%, 4.5%, 3.8%, 3.3%, respectively.
Utilities stocks emerged as the sole loser and the utilities sector SPDR (XLU) lost 0.2%. Stocks such as Duke Energy Corp (DUK – Analyst Report), the Southern Company (SO – Analyst Report), Exelon Corporation (EXC – Analyst Report), Sempra Energy (SRE – Analyst Report), and PPL Corporation (PPL – Analyst Report) declined 0.7%, 0.8%, 0.8%, 0.6%, and 0.5%, respectively.