Stocks rally to end the week on strong jobs report
06-Dec-19 16:15 ET
Dow +337.27 at 28014.97, Nasdaq +85.83 at 8656.53, S&P +28.48 at 3145.91
briefing.com
[BRIEFING.COM] U.S. stocks rallied on Friday after the employment report for November showed a stronger-than-expected labor market. The S&P 500 rose 0.9%, which was slightly less than the gains in the Dow Jones Industrial Average (+1.2%), Nasdaq Composite (+1.0%), and Russell 2000 (+1.2%).
The headline nonfarm payrolls figure increased by 266,000 (Briefing.com consensus of 182,000), which blew past many of the estimates on Wall Street. Other key figures included the unemployment rate declining to 3.5% (Briefing.com consensus 3.6%) from 3.6% in October and average hourly earnings increasing 0.2% (Briefing.com consensus 0.3%).
Supporting risk sentiment was a better-than-expected preliminary consumer sentiment reading for December and an announcement from China that it started to exempt some U.S. agricultural purchases from tariffs. Altogether, the news reinforced a positive economic outlook with the Fed presumably on hold, the state of the consumer in good shape, and the trade situation seemingly improving.
It was no surprise, then, to see a cyclically-charged rally. The energy sector (+2.0%) led the advance amid some key OPEC+ news that contributed to higher oil prices ($59.20, +0.75, +1.3%). The oil producers agreed to cut production by 500,000 barrels per day until March, with Saudi Arabia also offering up to an additional 400,000 barrel cut of its own.
The rate-sensitive utilities sector (-0.2%) struggled during the day, largely due to the increase in Treasury yields that resulted from the jobs report waning demand for bonds. The 2-yr yield increased four basis points to 1.63%, and the 10-yr yield increased five basis points to 1.84%. The U.S. Dollar Index increased 0.3% to 97.68.
In corporate news, Goldman Sachs (GS 224.61, +7.47, +3.4%) outperformed after Bloomberg reported that the bank could settle its 1MDB scandal for less than $2 billion, which would also be less than expected. Ulta Beauty (ULTA 262.20, +26.18, +11.1%) climbed more than 10% after providing positive earnings results and upbeat earnings guidance.
Separately, Dow components Apple (AAPL 270.71, +5.13, +1.9%), JPMorgan Chase (JPM 135.04, +1.98, +1.5%), and Nike (NKE 97.00, +1.21, +1.3%) set new all-time highs on Friday.
Reviewing Friday's economic data, which featured the Employment Situation Report for November:
- November nonfarm payrolls increased by 266,000 (Briefing.com consensus 182,000); private sector payrolls increased by 254,000 (Briefing.com consensus 175,000); the unemployment rate was 3.5% (Briefing.com consensus 3.6%), versus 3.6% in October; average hourly earnings were up 0.2% (Briefing.com consensus +0.3%) after increasing an upwardly revised 0.4% (from 0.2%) in October.
- The key takeaway, from the spike in nonfarm payrolls to the drop in the unemployment rate to the increase in wages, is that it was a very encouraging report for the U.S. economic outlook.
- The preliminary December reading for the University of Michigan Index of Consumer Sentiment rose to 99.2 from 96.8 in November, hitting the upper end of the range it has been in since the beginning of 2017.
- The key takeaway from the report is that it bodes well for the consumer spending outlook, as rising levels of consumer sentiment pair nicely with income gains to lend confidence to increased spending activity.
- Wholesale inventories increased 0.1% m/m in October (Briefing.com consensus +0.2%), on top of a downwardly revised 0.7% decline (from -0.4%) in September, which was the largest decline since February 2016. Wholesale sales were down 0.7% in October after declining 0.1% in September.
- The key takeaway from the report is that it could prove difficult for wholesalers to gain pricing power given that inventory growth remains well ahead of sales growth on a yr/yr basis.
- Consumer credit increased by $18.90 bln in October (Briefing.com consensus $17.30 bln) after increasing an upwardly revised $9.60 bln (from $9.50 bln) in September.
- The key takeaway from the report is that the October increase was fairly evenly distributed between nonrevolving credit like student or auto loans and revolving credit like credit cards.
Investors will not receive any notable economic data on Monday.
- Nasdaq Composite +30.5% YTD
- S&P 500 +25.5% YTD
- Russell 2000 +21.2% YTD
- Dow Jones Industrial Average +20.1% YTD
Market Snapshot
| Dow | 28014.97 | +337.27 | (1.22%) | | Nasdaq | 8656.53 | +85.83 | (1.00%) | | SP 500 | 3145.91 | +28.48 | (0.91%) | | 10-yr Note | -3/32 | 1.841 |
|
| | NYSE | Adv 2135 | Dec 743 | Vol 850.4 mln | | Nasdaq | Adv 2209 | Dec 891 | Vol 2.0 bln |
Industry Watch
| Strong: Energy, Financials, Industrials, Information Technology |
| | Weak: Utilities |
Moving the Market
-- Stocks rally after the November employment report exceeded expectations
-- China announced that it started to exempt some U.S. agricultural purchases from tariffs; consumer sentiment picks up in December
-- Cyclical sectors outperformed, Treasuries declined
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Consumer credit increases more than expected
06-Dec-19 15:25 ET
Dow +330.93 at 28008.63, Nasdaq +85.45 at 8656.15, S&P +29.47 at 3146.90
[BRIEFING.COM] The S&P 500 is up 1.0%, while the Russell 2000 is up 1.2%.
Consumer credit increased by $18.90 bln in October (Briefing.com consensus $17.30 bln) after increasing an upwardly revised $9.60 bln (from $9.50 bln) in September.
WTI crude settled up $0.75 (+1.3%) to $59.20/bbl after OPEC+ agreed to cut production by 500,000 barrels per day in the first quarter of 2020.
Tesla's price target raised to $500 at Morgan Stanley
06-Dec-19 15:00 ET
Dow +336.45 at 28014.15, Nasdaq +87.48 at 8658.18, S&P +29.50 at 3146.93
[BRIEFING.COM] The S&P 500 is up 1.0% and is on pace to end the week higher. The benchmark index is holding a modest 0.2% weekly gain.
Shares of Tesla (TSLA 336.77, +6.40, +1.9%) are seeing increased demand today after the stock's price target was raised to $500 from $440 at Morgan Stanley. On a related note, China's industry ministry will recommend subsidies for Tesla's Model 3 cars that are built in China, according to Reuters.
The earnings calendar will be pretty light next week, but it will include Costco (COST 294.98, +1.88, +0.6%) and Oracle (ORCL 54.96, +0.28, +0.5%) next Thursday.
Ulta Beauty is today's biggest gainer, while Ball Corp lags
06-Dec-19 14:25 ET
Dow +331.64 at 28009.34, Nasdaq +88.35 at 8659.05, S&P +30.16 at 3147.59
[BRIEFING.COM] The S&P 500 is down slightly from session highs with a gain of 0.9%.
Ulta Beauty (ULTA 266.91, +30.89, +13.1%) remains the biggest gainer in the S&P 500, while Ball Corp. (BLL 63.17, -2.97, -4.5%) is today's biggest laggard on no confirmed news driver. Energy stocks, as a group, are among the best performers.
Small-caps are also having a great day, with the Russell 2000 up 1.2%. For the week, the index is up 0.6%, which is better than its large-cap peers.
Gold and silver lose ground
06-Dec-19 13:55 ET
Dow +333.02 at 28010.72, Nasdaq +87.12 at 8657.82, S&P +31.23 at 3148.66
[BRIEFING.COM] The S&P 500 continues to trade higher by 1.0%.
Gold futures settled down $17.60 (-1.2%) at $1464.9/oz, while silver futures settled today's session $0.44 lower (-2.6%) at $16.61/oz. The strong jobs report and upbeat trade news today has underpinned the risk-on mindset that has bypassed interest for precious metals.
The U.S. Dollar Index is currently up 0.3% to 97.74. |
