Bulls Firmly In Charge On Friday - U.S. Commentary
59 minutes ago
(RTTNews) - Stocks are headed for a strong end to the week on Friday following the release of September's job report showing a robust job market. The strength has led the Dow to a near triple digit gain and the S&P to record intraday levels.
The highly anticipated report showed strong growth in September's labor market, but more importantly, the Labor Department upwardly revised July and August's reports by 118,000 jobs.
The report paints the picture of a strong economy at a time when many believed the economy could be headed for a recession. The data will most likely lead to lower expectations for a reduction in interest rates.
Robert Dye, Chief Economist at PNC Bank, commented on the new interest rate outlook saying, "We expect the FOMC to hold the Fed funds rate at 4.75 percent at their October 30-31 meeting. They will wait for more data to confirm continued slower job growth and good core inflation data before cutting the funds rate again at their December 11 meeting."
After opening the session well above the unchanged line, the major averages have moved steadily higher and are currently trading near their intraday highs. The Dow is up 87.63 at 14,061.94, the Nasdaq is up 39.42 at 2,772.99, and the S&P 500 is up 12.15 at 1,554.99.
Economic Data
Employment increased by a little more than expected in the month of September, according to a report released by the Department of Labor on Friday, with the report also showing a significant upward revision to the data from the previous month.
The report showed that non-farm payrolls rose by 110,000 jobs in September following a revised increase of 89,000 jobs in August. Economists had expected employment to increase by about 100,000 jobs compared to the decrease of 4,000 jobs originally reported for the previous month.
Despite the increase in total employment, however, the unemployment rate edged up to 4.7 percent in September from 4.6 percent in August. The increase, which came in line with economist estimates, reflected an increase in the number of people looking for work.
The Labor Department added that average hourly earnings rose by 7 cents, or 0.4 percent, to $17.57. With the increase, average hourly earnings are up 4.1 percent year-over-year.
The strong employment growth in September and the upward revision to the August data are likely to help ease recent concerns about the possibility of a recession, although the data is also likely to offset recent optimism about the likelihood of another interest rate cut.
Sector News
Steel stocks are up sharply on Friday, leading the Amex Steel Index to a 3 percent gain. Within the sector, Commercial Metals (CMC) is leading the upward movement after Goldman Sachs added the company to its list of top U.S. stocks to own.
Airline stocks are also having a strong session, as they continue to benefit from reports of strong September traffic at several airlines and a decrease in the price of oil. The strength has led the Amex Airline Index to a 2.7 percent gain, its fourth gain in five sessions.
Another area of the market experiencing significant strength is the transportation sector. Within the sector, JB Hunt (JBHT) is turning in one of the best performances after the trucking company was upgraded by Bank of America.
The recently battered housing sector is also following the day's upward trend, with the Philadelphia Housing Sector Index climbing 1.2 percent on the day. The sector is benefiting from the positive employment report, on hopes that a rebounding economy will pull the housing market out of its slump.
Other sectors trading higher include the retail, wireless, brokerage, chemical, and biotech sectors.
On the downside, the oil service sector is one of the few areas of the economy bucking the day's upward trend, as Nabors Industries (NBR) drives the sector lower. Nabors is trading lower after the company warned that its third-quarter profits are likely to miss Wall Street's expectations.
Stocks In The News
Washington Mutual (WM) said on Friday that it expects its third-quarter earnings to drop by roughly 75 percent due to factors related to the slumping housing market. The lender expects its loan loss provision to total $975 million along with a downward adjustment of approximately $150 million related to its mortgage loans holdings.
The company also reported losses of $110 million and another $150 million in securities trading losses. Washington Mutual maintains that it still has the necessary liquidity to grow and prosper its business. Shares of Washington Mutual are down 1.5 percent.
On the other hand, shares of Research In Motion are up 11.7 percent after the company said that its profit and earnings doubled in the second quarter and should be better than expected for the remainder of the year.
The Ontario based company, which produces the highly popular blackberry smart phone, reported second quarter earnings of 50 cents per share compared to 25 cents per share last year. Meanwhile, revenue climbed to $1.37 billion from $658.5 million.
The income results matched analysts' estimates, while the revenue bested expectations of $1.37 billion. Looking forward, the company expects to report earnings of 59-63 cents per share for its third quarter on revenue of $1.60-$1.67 billion.
Other Markets
In overseas trading, the European markets ended their session with considerable gains, with the U.K.'s FTSE 100 climbing 0.7 percent. The Asian markets ended their session mixed, with Japan's Nikkei closing down modestly lower and Hong Kong's Hang Seng rising sharply.
The treasury markets have experienced significant weakness on Friday, as investors move money out of fixed-income and into equities following the optimistic jobs report. The yield on the benchmark 10-year note has risen 12 basis points to 4.64 percent.
The greenback was unable to maintain its early rally, as it fell back to its morning levels after receiving a boost from the jobs report. |
