U.S. Stocks Extend Rally Following Weaker Than Expected Jobs Data

Capping off a strong week for the markets, stocks moved considerably higher during the trading session on Friday. The Dow and the S&P 500 closed higher for the fifth straight day, while the tech-heavy Nasdaq extended its winning streak to six sessions.

The major averages pulled back off their best levels going into the close but remained firmly positive. The Nasdaq surged 184.09 points or 1.4 percent to 13,478.28, the S&P 500 jumped 40.56 points or 0.9 percent to 4,358.34 and the Dow advanced 222.24 points or 0.7 percent to 34,061.32.

For the week, the Nasdaq skyrocketed by 6.6 percent, the S&P 500 soared by 5.9 percent and the Dow spiked by 5.1 percent.

The continued strength on Wall Street reflects a positive reaction to a Labor Department report showing U.S. employment rose by less than expected in the month of October.

The closely watched report said employment climbed by 150,000 jobs in October after jumping by a downwardly revised 297,000 jobs in September.

Economists had expected employment to increase by 180,000 jobs compared to the surge of 336,000 jobs originally reported for the previous month.

The Labor Department also said the unemployment rate crept up to 3.9 percent in October from 3.8 percent in September. The unemployment rate was expected to remain unchanged.

The data has added to optimism the Federal Reserve is done raising interest rates after the central bank left rates unchanged for the third time in four meetings earlier this week.

Treasury yields are extending a recent slump following the release of the report, adding to the buying interest on Wall Street.

“Given that jobs growth is slowing and the unemployment rate is ticking up slightly, that is the kind of data that will keep the Fed on hold and both stock and bond prices should move higher (bond yields lower) in the absence of a more aggressive Fed,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

A separate report released by the Institute for Supply Management showed a bigger than expected slowdown in the pace of growth in U.S. service sector activity in the month of October.

The ISM said its services PMI fell to 51.8 in October from 53.6 in September, although a reading above 50 still indicates growth. Economists had expected the index to edge down to 53.0.

Sector News

Airline stocks saw substantial strength on the day, driving the NYSE Arca Airline Index up by 4.9 percent. The index continued to recover after ending Wednesday’s trading at its lowest closing level in over three years.

Considerable strength was also visible among gold stocks, as reflected by the 4.4 percent spike by the NYSE Arca Gold Bugs Index.

The rally by gold stocks came amid a modest increase by the price of the precious metal, with gold for December delivery inching up $5.70 to $1,999.20 an ounce.

Interest-sensitive housing stocks also turned in a particularly strong performance, resulting in a 3.2percent surge by the Philadelphia Housing Sector Index.

Banking, biotechnology and telecom stocks also saw notable strength, while oil stocks were among the few groups to buck the uptrend amid a steep drop by the price of crude oil.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved notably higher on Friday, with the Japanese markets closed for a holiday. Hong Kong’s Hang Seng Index soared by 2.5 percent, while South Korea’s Kospi jumped by 1.1 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the German DAX Index rose by 0.3 percent, the French CAC 40 Index dipped by 0.2 percent and the U.K.’s FTSE 100 Index fell by 0.4 percent.

In the bond market, treasuries moved sharply higher, extending the strong upward move seen over the two previous sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 11.1 basis points to 4.558 percent.

Looking Ahead

The economic calendar is relatively quiet next week, although traders are likely to keep an eye on reports on initial jobless claims, the U.S. trade deficit and consumer sentiment along with remarks by Fed Chair Jerome Powell.

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